France reels from economic ‘shock’

France set a new economic record in May, but no one is celebrating…

Official figures have shown that annual French inflation hit a 17 year high of 3.3 % in May, powered by rising prices for food and fuel. Analysts reacting to the news were divided on future trends, with some warning that inflation pressures would bedevil the French economy for the rest of the year while others saw prospects for tamer price movements. Meanwhile, the governor of the Bank of France, Christian Noyer, told a meeting of French financiers that he was "confident" that the rise of prices would "turn back progressively in the second half of the year and at the beginning of next year."

Noyer, who also sits on the monetary policy council of the European Central Bank (ECB),  said that inflation would come back progressively into line with the target of price stability "once the external shock of the strong rise of energy and raw materials prices has passed," he said. The ECB, which determines interest rates for the eurozone, has set an upper medium-term target for inflation of 2.0 %.

The French national statistics body INSEE said consumer prices in France rose by 0.5 % in May from April, taking the 12-month rate to 3.3 %, its highest reading since July 1991. INSEE said the gain in May was driven by increased prices for oil-based goods and also by seasonal rises in prices of fresh produce and some services. The price of energy shot up by 4.2 % in May from the April level while food prices rose by 1.0 % to show a 12-month gain of 5.7 %.