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French inflation negative for first time since 2009

[PARIS] French year-on-year inflation turned negative for the first time in more than five years in January, EU-harmonised data released on Thursday by the INSEE national statistics office showed in a report which pointed to a growing risk of deflation in the eurozone's second largest economy.

French consumer prices fell by 0.4 per cent year-on-year, dragged down by a 7.1 per cent drop in energy prices and 1.4 drop in the cost of manufactured goods. Month-on-month, prices fell by -1.1 per cent in January from December, with winter sales also affecting prices.

The last time annual inflation was negative in the eurozone's second-largest economy was in October 2009, when it hit -0.2 per cent.

Economists polled by Reuters had forecast slightly smaller drops in prices of -1.0 per cent month-on-month and of -0.3 per cent year-on-year.

French core, or underlying, inflation, which excludes the most volatile consumer prices and tax measures as well as public sector prices was flat month-on-month and edged up 0.2 per cent from a year ago as the price of fresh food products increased.

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France's Socialist government has repeatedly warned of the risk of outright deflation in the eurozone as part of its campaign for more growth-oriented fiscal and monetary policy in the bloc.

French EU-harmonised inflation fell to a historical low of -0.8 per cent in July 2009 and hit an all-time high of 4.0 per cent in July 2008, according to INSEE's records going back to 1991.


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