Other sites of Banque de France

Language switcher

Inflation

By Eric Monnet and Angel Gomez

The difference in core inflation between the United States and the euro area is mainly due to housing rents. Since last year’s blogpost on the issue, this feature has become even more blatant: core inflation excluding housing rents is currently lower in the United States than in the euro area, whereas US core inflation is still much higher.

Chart 1: Core inflation vs. core inflation excluding housing rents (quarterly data). Sources: CPI (BLS) for the United States and HICP (Eurostat) for the euro area

By Yannick Kalantzis and Jean-François Ouvrard

A EUR 10 rise in the price of oil results in a 0.4% increase in consumer prices in France and the euro area. A significant part of this rise can be attributed to the non-energy components of the consumer price index. This indirect effect amounts to 0.1 percentage point in the euro area and 0.15 percentage point in France.

Actual inflation and inflation simulated with a constant oil price in the euro area (% change, yoy) Source: Eurostat, authors' calculations. Note: at each date, the oil price is assumed to be constant over the two previous years.

Since 2008, growth in nominal industry-level wage floors in France has slowed progressively. In a near-zero inflation environment, wage floors have risen by less than 1% per year since 2014. Increases in negotiated wages are largely determined by past inflation and by changes in the national minimum wage (NMW). As a result, the upturn in inflation observed in 2017 could lead to slightly stronger growth in nominal negotiated wages in 2018.

By Louis de Charsonville, Violaine Faubert and Antoine Sigwalt

Since the start of 2016, French core inflation has been far below the euro area average. This gap can be attributed to the differences in economic fundamentals, such as the slower improvement in the labour market in France compared with that of the euro area as a whole, and, more recently, temporary shocks, such as the decline in the communications prices.

By Gilbert Cette, Laure Frey and Gilles Moec[1]

The Fed attributes the current disconnect between a tight labour market and low inflation to transitory factors, while also acknowledging an unusual level of uncertainty. It is not the first time such disconnect appears. In the late 1990s already such configuration had triggered a debate on a structural downward shift in inflation. It later transpired that this assessment was based on erroneous data.

By Marie Aouriri and Héloïse Tournoux

The public spending debate merits precise comparisons. The public sector payroll has been higher in France than in Germany by five percentage points of GDP for over 20 years. However it is overestimated by almost two percentage points as a result of hospital work that is not accounted for in Germany as public sector employment. With regard to education, more than one percentage point can be explained by demographics and organisational differences. Nevertheless, for the other government functions, there is still a significant difference, with France spending two percentage points of GDP more than Germany.

Inflation in the euro area (EA) is recovering. This recovery is explained by the sharp rise in import prices since the beginning of the year and by the steady improvement in the economic situation. In the absence of major shocks, inflation is expected to be around 1.8% in 2019 according to a Phillips curve augmented with import prices.

By Louis de Charsonville and Caroline Jardet

Services price inflation in France stood at 1.0% in 2016, well below its average from 1999 to 2015 (around 2%). This paper looks at the mechanisms through which the fall in oil prices and lower headline inflation have contributed to slowing services prices since mid-2014. An analysis of these interactions suggests that services price inflation will begin to recover as of 2017, to around 2%.