French inflation fell sharply in February, with the consumer price index dropping to 0.8% from 1.7% in January. This substantial easing was primarily attributed to an average 15% fall in electricity prices, which benefited over 24 million subscribers. Energy inflation itself recorded a decline of 5.7% compared with the same period last year. On a monthly basis, overall prices remained stable.
The EU harmonised inflation rate in France was slightly higher at 0.9%, but still well below figures reported in other major European economies. For instance, Spain’s inflation climbed to 2.9%, Germany maintained a steady 2.8%, and Italy experienced its highest rate since late 2023 at 1.7% year-on-year. These differences highlight France’s comparatively subdued price pressures amid a broader European environment marked by rising costs.
While lower inflation has provided some relief for consumers, it has not translated into robust economic growth. French GDP contracted by 0.1% in the final quarter of 2024, following a 0.4% expansion in the previous quarter partly boosted by the Olympic Games. Household consumption also slowed, with a 0.5% month-on-month decline in January 2025. Additionally, a drop in construction investment has weighed on overall growth, leading to a full-year GDP expansion of just 1.1% for 2024 the slowest since the 2020 contraction.
Economists expect that while inflation might rise slightly in the spring, it will remain below the 2% threshold. The moderation in wage growth, which slowed from over 5% in Q4 2022 to 2.1% in Q4 2024, is seen as a positive factor that could help contain further price increases in the business sector. However, the economic outlook remains cautious, as modest inflation does little to offset challenges in consumer spending and investment.
France’s sharp inflation decline, driven by falling energy costs, offers some respite for households. Yet, the underlying economic slowdown and low wage growth suggest that further policy adjustments may be needed to stimulate broader economic recovery.
