France's annual inflation accelerated in August, as stronger energy prices offset softer pressure from the services sector, according to preliminary figures from the national statistics agency INSEE.

The consumer price index (CPI) rose 2.4% year-on-year in August, in line with the expected +2.4% and up from July's reading of +2.1%. The harmonised index of consumer prices (HICP), the measure used for comparisons across the euro area, increased 2.7% y/y, ahead of the +2.6% expected and compared with +2.4% in July.

The acceleration in the national index was primarily driven by energy costs, particularly petroleum products, which increased at a faster pace than in the previous month. Energy has been among the most volatile components of euro-area inflation since the 2022 energy crisis, when surging gas and electricity costs pushed currency-bloc inflation into double digits. Food prices contributed modestly to the uptick, while the decline in manufactured goods prices continued to ease. Services inflation — a component ECB officials have repeatedly flagged as a key gauge of domestic price pressure — softened slightly, helping to limit the overall increase in consumer prices, and tobacco prices rose at the same annual pace as in July.

On a monthly basis, the CPI is expected to increase 0.7% in August, following a 0.6% rise in July. The gain was largely driven by a seasonal rebound in manufactured goods prices, especially clothing and footwear, after summer sales had weighed on prices in the previous month. Energy prices also moved higher during August, again reflecting rising petroleum product costs. Food prices increased, with fresh food providing a notable contribution. By contrast, services prices were broadly unchanged from July, while tobacco prices remained stable.

The HICP is projected to rise 0.8% month-on-month in August, compared with 0.6% in the previous month. France, the euro zone's second-largest economy, reports the harmonised measure under a common EU methodology that allows direct comparison with other member states; the European Central Bank uses HICP readings when assessing its 2% medium-term inflation target. France is among the first large euro-area economies to publish a preliminary CPI estimate each month, and its release typically precedes Eurostat's flash reading for the currency bloc as a whole, which aggregates national data — giving the French figures relevance beyond the domestic economy.

The August figures indicate that France is experiencing renewed inflationary pressure from energy prices, while underlying price pressures remain relatively contained. INSEE's final August data, due later in September, will confirm the detailed component breakdown.

Source: ForexLive