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French Inflation Rises Further

French Inflation Rises FurtherFrench Inflation Rises Further

Inflation in France has reached 0.3 percent, signaling a wider recovery in prices across the Eurozone.

French inflation reached a recent trough of minus 0.4 percent in January, but has recovered in line with the rest the currency bloc to eventually escape deflation. Yet the inflation breakdown shows that the return to price growth was led by rebounding food and energy prices, Reuters reported.

There is not much evidence to suggest that return to inflation is a result of the European Central Bank’s asset purchase program, launched in March.

Many economists expect inflation in France and the rest of the Eurozone will rise following a sharp increase in the growth rate of the money supply. The M3 measure, which counts the euros in the bank accounts of households and companies, hit 5.3 percent annual growth in April. The asset purchase program is expected to lift it further.

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

France has also been stuck in an economic funk for decades. Since 1990, according to the Paris-based Organization for Economic Cooperation and Development, France’s per capita gross domestic product has grown more slowly than that of any other wealthy nation but one (Italy). The country’s manufacturing output today is lower than it was in 1990.

Between 2045 and 2050, France’s working-age population is projected to pass Germany’s to become the largest in the euro zone.

Of the eurozone’s big four, France has the highest labor productivity. French workers are more productive than German workers -- and according to the OECD trail only those in the US and a few small, rich European countries in output per hour worked. Multiply that productivity times the projected working-age population, and you might think France would soon be poised to overtake Germany as the continent’s biggest economy.

Financialtribune.com