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French Inflation, German Prices Keep Pressure on ECB to Ease

Feb. 20 (Bloomberg) -- French inflation was less than expected in January and German producer prices fell, keeping pressure on the European Central Bank to add stimulus.

Consumer prices in France fell 0.6 percent from the previous month and rose a less-than-expected 0.8 percent from a year earlier, national statistics office Insee said today from Paris. German producer prices fell 1.1 percent in January from a year earlier, the Bundesbank said.

With a sales-tax increase and annual statistical adjustments bolstering the French price numbers, economists had expected a 0.9 percent rise in prices from a year earlier. ECB President Mario Draghi said two weeks ago he’s weighing incoming data in considering further stimulus to lift inflation closer to its 2 percent target. The euro fell.

The numbers “tell a lot about the dis-inflationary forces at work within the French economy,” said Dominique Barbet, an economist at BNP Paribas in Paris. The monthly decline is “particularly impressive given the numerous tax hikes which occurred in January.”

Excluding food and energy, prices rose just 0.1 percent in January from a year earlier. The price of manufactured goods fell 1.2 percent compared with January 2013.

Separately, business surveys by Markit Economics showed both manufacturing and service industries losing momentum across the euro area and unemployment rose in the Netherlands.

Draghi said Feb. 7 the ECB would scrutinize data over the coming month to consider whether deteriorating price pressures are sufficient to merit fresh aid or a stabilization in money markets.

The French price numbers “should make it easier for the ECB to cut next month,” Frederik Ducrozet, an economist at Credit Agricole in Paris, said.

To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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