French inflation dips to 6.7% in December - INSEE

By Scott Kanowsky 

Investing.com -- French inflation unexpectedly fell in December, according to provisional data on Wednesday, mirroring a dip in headline consumer prices in neighboring Germany earlier this week.

The INSEE national statistics agency said France's EU-harmonized annual inflation rate dropped to 6.7% during the month, down from 7.1% in November. Economists had predicted the figure would climb slightly to 7.2%.

It marks the first time that price growth has slowed in the Eurozone's second-largest economy since September. Inflation had remained persistently elevated in France over the first two months of the final quarter of 2022 despite heavy government spending on widespread protection for households against higher prices.

When not adjusted for European Union standards, inflation in France decelerated to 5.9% year-on-year from 6.2% in the prior month.

"This decrease [...] should result from a slowdown of energy prices and, to a lesser extent, service prices," INSEE said in a statement.

The agency added that food price growth is still far higher than it was in December 2021, while the cost of manufactured goods - which include items like clothing and vehicles - has also grown.

The overall decline in French inflation follows a larger-than-expected fall in Germany in December. The EU-harmonized yearly consumer price index in Europe's largest economy dipped to 9.6% from 11.3% registered in the prior month. It is also down from a seven-decade high of 11.6% reached in October.

However, tempering optimism over a slowdown in inflation in Germany were preliminary numbers from the country's largest federal states. These figures pointed to core inflation remaining at more than twice the European Central Bank's 2% target and showed little improvement at the end of the year.

In a tweet following the release of the French data, Oxford Economics' Oliver Rakau said the decline is "necessary but likely not sufficient" for the ECB to shift out of its recently aggressive monetary policy tightening yet.

At her last press conference of 2022, ECB President Christine Lagarde warned that underlying inflation was likely to stay strong despite a decline in the annual headline numbers as sharp increases in energy prices last year start to fade out of calculations.