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French macro prospects - Edition October, 2014 - Crédit Agricole S.A.
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  • Edition October, 2014

    France: Scant risk of a deflationary spiral

    Fears of seeing the Eurozone sink into deflation, against a backdrop of the spectre of the Japanese example, have propelled inflation centre stage. France has not been spared the general price downtrend and inflation has fallen substantially in the recent period, with prices rising by just 0.3% in the 12 months to end-September. In this issue, we aim to examine the causes of this slowdown in prices, or rather the accumulation of factors that have led to the current severe disinflation.

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  • Content:

    - Introduction: examining the deflation concept
    - Why is inflation so low?
    - Obstacles to deflation
    - Our 2015 scenario in a nutshell
    - What impact will disinflation and a low-inflation environment have on household savings behaviour?

  • Extract - Persistently low inflation, but a few upside factors

    Trend inflation should remain low, therefore. It will, however, be edged upwards by a range of factors. The depreciation of the euro, especially against the dollar (our scenario posits a euro at 1.23 to the dollar by end-2015), should push up import prices. Our model takes this effect into account in calculating core inflation. The impact should also be visible on other components, and in particular on energy prices, with an upside effect on total inflation. The transmission of VAT increases is also likely to continue. Some of the temporary effects that have affected prices are likely to fade. We are thus likely to see a rise in food prices, whereas the abnormally clement temperatures in early 2014 had sent fresh produce prices tumbling in the early part of the year.

  • France: Inflation running below trend

    In September this year, the inflation rate slowed slightly, to 0.3% y/y, compared with 0.4% y/y in August. This is a very low level, far lower than the trend level of 1.6% since 2000.

    France: Inflation running below trend
  • Associative topics : Banking and Insurance | Economics | France


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