France’s Harmonized Inflation Finalized at 2.6% in August

France’s harmonized inflation rate was finalized at 2.6% year over year in August, 0.1 percentage point below the preliminary estimate, while still accelerating from 2.4% in July. The national consumer price index, a separate measure used for domestic inflation tracking, was confirmed at 2.4% year over year after 2.1% in July.

In its final August consumer-price report, France’s national statistics institute INSEE also revised the monthly Harmonised Index of Consumer Prices, or HICP, down to 0.7% from the preliminary 0.8%. The monthly CPI increase of 0.7% was unchanged from the first estimate. The revisions were therefore confined to the harmonized measure, not the national headline CPI.

Final HICP reading was revised down, CPI was unchanged

The distinction between HICP and CPI matters because the two figures are built for different purposes. HICP is designed to make inflation comparable across European Union countries, while the national CPI is France’s domestic consumer-price measure. INSEE said the main methodological difference concerns health spending: HICP uses prices net of social-security reimbursements, whereas CPI uses gross prices.

For August, the annual gap between HICP and CPI was 0.27 percentage point, up from 0.25 point in July. INSEE attributed 0.25 point of the August gap to differences in the weights assigned to components of the two indices, with the remaining 0.02 point coming from differences in movements between net and gross prices. That helps explain why the final harmonized rate stood at 2.6% even though national CPI inflation was 2.4%.

The final figures also show that August’s monthly price increase was not entirely a reflection of the underlying trend. CPI rose 0.7% from July, but on a seasonally adjusted basis prices increased 0.2%, down from a seasonally adjusted 0.5% gain in July. A large part of the unadjusted monthly move came from seasonal patterns in manufactured goods after France’s summer sales period.

Energy was the main force behind the August pickup

Energy remained the clearest source of upward pressure in the annual figures. Energy prices were 16.7% higher than a year earlier in August, accelerating from 12.6% in July and 11.0% in June. Petroleum-product prices rose 28.7% year over year, compared with 20.7% in July. Within that group, diesel prices were up 36.4% from a year earlier and gasoline prices rose 19.1%.

The pattern was not uniform across every energy category. Electricity prices returned to annual growth of 1.1% after falling 1.0% in July, while natural-gas inflation eased to 14.3% from 17.7%. On a month-to-month basis, overall energy prices rose 3.4% in August, including a 5.6% increase in petroleum products.

Food inflation remained much more restrained overall, edging up to 1.1% year over year from 1.0% in July. Fresh-food prices, however, accelerated to 5.9% from 3.8%. INSEE linked part of that increase to heat waves, with particularly sharp annual gains in some fresh vegetable categories. Prices for food excluding fresh products increased 0.4% from a year earlier, a slightly slower pace than in July.

The supermarket picture was also less inflationary than the fresh-food figures alone might suggest. INSEE’s measure covering industrial food, household-cleaning and personal-care products sold in large retailers was down 0.2% year over year in August. Industrial food prices in that retail channel were also 0.2% lower than a year earlier, while cleaning and personal-care products fell 0.4%.

Underlying inflation cooled as services slowed

Core inflation eased to 1.1% year over year in August from 1.3% in July, indicating that the increase in the headline measures was concentrated more heavily in volatile categories such as energy. Services inflation also slowed, falling to 1.9% from 2.2% a month earlier, even though several service categories continued to post faster price increases.

Accommodation services were one of the main areas of deceleration, rising just 0.7% from a year earlier after a 7.3% increase in July. Transport-service inflation slowed to 0.8% from 1.2%. By contrast, insurance prices accelerated to 3.7% from 2.3%, restaurant prices rose 2.1% after 1.9%, and communication services remained elevated at 10.1% year over year, although that was slightly below July’s 10.7% rate.

Manufactured-goods prices were still below their year-earlier level, but the decline became less pronounced. They fell 0.4% year over year after a 0.7% decrease in July. On a monthly basis, manufactured-goods prices jumped 1.6% following a 2.0% decline in July, largely reflecting the seasonal rebound after summer sales. Clothing and footwear prices alone rose 7.3% month over month after dropping 9.8% in July.

France remained below the euro area flash estimate

France’s finalized HICP rate also remained below the broader euro-area estimate published earlier this month. Eurostat’s September 1 flash estimate put euro-area inflation at 3.3% in August, up from 2.9% in July. That flash release had still shown France at the preliminary 2.7% rate, so the 2.6% figure published by INSEE on September 15 represents a subsequent national revision.

Energy was also the fastest-rising main component in Eurostat’s flash estimate for the currency bloc, with an annual rate of 14.3% after 10.3% in July. Services inflation for the euro area was estimated at 3.0%, down from 3.3%. The comparison suggests that France shared the broader energy-driven acceleration while continuing to record a lower harmonized headline rate than the euro-area flash estimate.

The next cross-country check will come when Eurostat publishes the complete August HICP data for the euro area, European Union and member states on September 17. INSEE is scheduled to release France’s preliminary September consumer-price figures on September 30, followed by the final September report on October 15.