Lower oil and clothing costs pulled down French consumer prices in January, according to official data today, despite consumer perceptions that life is getting more and more expensive.
Prices paid by consumers in the euro zone's second largest economy fell 0.4 per cent in January from the previous month on a European Union-harmonised basis, and climbed 1.4 per cent on the year, national statistics office INSEE said.
Economists were expecting a 0.3 per cent drop from December and an increase of 1.5 per cent on the year. "Yet again a very low level of inflation," said Alexander Law, chief economist at Xerfi.
"That's really good news, probably the best news we've had for quite a while for the French economy because it's really the mainstay of household purchasing power." French consumer spending has fuelled economic growth but complaints about rising living costs have become a major issue in the campaign for the April-May presidential election.
The data showed relief for consumers at the petrol pump with a 1.1 per cent drop in oil prices in January compared to the previous month. Overall energy prices dropped 0.7 per cent and economists said this boded well for the months ahead.
"On a yearly basis, energy prices will benefit from the backlash of the rise in oil prices that occurred between January and July 2006," said Mathilde Lemoine, chief economist at HSBC France.
"Trends in energy products should thus lead to a further easing in inflation in the first half of 2007." Clothes and shoes were also cheaper in the January sales, with prices tumbling 7.2 per cent.
The overall cost of manufactured goods was down 1.4 per cent. Excluding tobacco, prices were down 0.4 per cent on the month and up 1.3 per cent from a year earlier.