Inflation in France hits its lowest level in four years in February

Paris: In the EU’s second-biggest economy, inflation slowed to 0.8% year-on-year in February, mainly due to a fall in the price of electricity.

Driven by a drop in electricity prices, the consumer price index fell to 0.8% in February, after +1.7% in January, according to a flash estimate by French statistics office Insee. On a monthly basis, prices haven’t changed in France.

The EU harmonised index is only slightly higher, 0.9% for February compared with last year.

The slowdown in inflation in the EU’s second-biggest economy is fuelling further expectations that the European Central Bank (ECB) will cut the deposit rate by another 25 basis points to 2.5% next week.

The very low inflation in February 2025, the lowest since February 2021, is explained in particular by the fall in electricity prices”, said chief economist Sylvain Bersinger from Paris-based economic consultant Asterès.

After two years of successive increases, an average fall of 15% in electricity prices came into effect on 1 February for more than 24 million subscribers. The energy inflation sat at -5.7% in February compared with last year.

On the other hand, food prices increased slightly over one year, unlike service prices which slowed. Manufactured products and tobacco also slowed down but to a lesser extent.

“In the coming months and quarters, inflation is not expected to remain at such a low level due to slightly inflationary developments in the production chain,” said Bersinger adding that “inflation is expected to rise slightly in spring 2025, while remaining below 2%.”

He expects industrial production prices to start climbing after showing no change in January 2025, and a further rise in agricultural production prices.

On the other hand, “the slowdown in wage growth will prevent inflation from rebounding sharply. While wages had increased by more than 5% year-on-year in the fourth quarter of 2022, the increase was only 2.1% in the fourth quarter of 2024. This development, expected due to the fall in inflation, will limit the rise in business costs, and therefore the rise in prices”, said Bersinger.

French inflation figures in February stand out from other European countries. In Spain, inflation climbed to 2.9% over one year this month.

In Italy prices jumped by 1.7% compared with last year, according to the Italian Statistics Office ISTAT’s preliminary estimates, which is the highest inflation rate since September 2023.

On a quarter-by-quarter basis, the French economy contracted by 0.1% in the last three months of 2024, confirming Insee’s preliminary estimates. This compares to an expansion of 0.4% in the previous three months which was partly due to the Paris Olympic and Paralympic Games boosting growth.

In the last three months of 2024, household consumption growth slowed to +0.3%, and this trend continued in January 2025 too according to separate data by Insee, showing a drop of 0.5% month-on-month.

The French GDP was also dragged down at the end of last year by the declining numbers of fixed investment led by a drop in construction investment.

On an annual basis, the economy expanded by 0.6%, slightly below the flash estimate of 0.7%, marking the slowest yearly growth since the last annual contraction at the end of 2020.