French inflation pressures ease as more firms cut prices

FRENCH inflationary pressures are continuing to ease, with fewer firms raising prices and some even cutting them, the country’s central bank said.

Only 8 per cent of industrial companies imposed increases in June, the lowest proportion in more than two years, according to the Bank of France’s monthly survey of 8,500 businesses. The share reducing tariffs reached a near three-year high of 6 per cent.

In construction, fewer businesses lifted prices last month than in May, while in services the measure was stable.

Speaking on Tuesday (Jul 11) after the publication of the survey, Bank of France governor Francois Villeroy de Galhau said the slowing pace of consumer price increases should be “quite noticeable” next year, even if rises for some core consumer goods and services may be more persistent.

Such signs that the euro area may be over the worst of the inflation spike are fuelling debate at the European Central Bank (ECB) over when it will stop raising interest rates.

“I think we are not far from the high point of interest rates,” Villeroy, who is a member of the ECB’s Governing Council, said on France Info radio. “But once we’ve reached this high point, it will be more of a plateau, we will need to remain for a sufficiently long time to beat the sickness, to get inflation to 2 per cent.”

Briefing journalists on the findings of the survey, Bank of France chief economist Olivier Garnier said the indicators of selling prices of firms support the institution’s forecast that inflation will fall back from the second half of this year, and further still in 2023 and 2024.

“In all sectors, there is a clear reduction in the share of businesses raising prices,” Garnier said.

The survey also showed economic activity holding up in France, with growth in industry, services and construction in June. The Bank of France reiterated its forecast for a 0.1 per cent expansion in gross domestic product in the second quarter.

“There was a strong concern last winter that the French and European economy would fall into two traps of inflation setting in and a recession,” Villeroy said. “The good news this morning is that we should gradually exit inflation while avoiding recession.” BLOOMBERG