French Inflation Jumps More Than Expected to Hit New Record

(Bloomberg) --

French inflation accelerated more than expected to reach another record, reflecting the economic repercussions of Russia's invasion of Ukraine and the growing challenges facing policy makers.

European Union-harmonized consumer prices rose 5.1% from a year ago in March -- the most since the data series began in 1997. The median estimate in a Bloomberg survey of economists was 4.9%. Out of 19 surveyed, 13 expected a lower reading. 

Thursday's data follow unexpectedly high readings the previous day from Germany and Spain, with the latter reporting a number approaching 10%. France, the euro area's second-largest economy, has done more to shield consumers from spiking energy costs. 

The ramp-up in euro-zone prices is heaping pressure on the European Central Bank to raise interest rates from record lows. But while some ECB officials are pushing for one or more hikes this year, President Christine Lagarde has stressed the need for a gradual approach amid “significant risks” to economic growth. 

What Bloomberg Economics Says...

“French inflation rose by more than anticipated in March, but it's still lower than in other major European economies. A government imposed cap on gas and electricity prices should mean it stays that way in 2022, keeping French consumers sheltered from the worst of the cost-of-living crisis and limiting downside risks to growth.”

--Maeva Cousin, senior economist. For full react, click here

The latest French figures will also resonate with President Emmanuel Macron, who's facing elections in little more than a week. The cost of living has already become the campaign's key issue, with the incumbent's main rivals pledging more radical steps to aid households by freezing fuel prices or slashing sales taxes on essential goods.

Macron's government has already earmarked about 25 billion euros ($27.9 billion) to cap electricity and natural-gas prices, and offer motorists a rebate on gasoline and diesel. While the Insee statistics office estimates that such measures have shaved about 1.5 percentage points off inflation, household expectations for future price increases have hit the highest level since records began in 1972.

March's price jump was driven by energy, food and services. Inflation in manufactured goods eased slightly, to 2.1% from 2.2% the previous month.

©2022 Bloomberg L.P.