The annual inflation rate in France slowed sharply to 0.8% in February 2025, the lowest level since February 2021, down from 1.7% in January and well below market expectations of 1%, according to preliminary estimates.
France inflation rate falls below 1%
This significant decline was largely driven by a sharp drop in energy prices, which fell by 5.7% in February compared to a 2.7% increase in January. The main contributor to this decline was a steep reduction in electricity costs, which have been a major driver of inflation in recent months. The energy sector's deflationary impact helped to alleviate broader price pressures across the economy.
In addition to energy, a slowdown was also observed in other key sectors. Services inflation eased to 2.1% in February, down from 2.5% in January, reflecting slower growth in areas like transport, healthcare, and housing services. Manufactured goods saw price increases stabilize at 0%, compared to a modest 0.2% rise in January, signaling that the cost pressures in this category have moderated. Tobacco prices, which had been a significant inflation driver in recent months, also experienced a deceleration, rising by 4.5% in February compared to 6% in January, indicating a slight easing in tobacco price hikes.
Food prices remain a concern
However, food prices remained a concern, edging up slightly by 0.3% in February after a smaller 0.1% increase in January. This increase was primarily driven by a surge in the prices of fresh produce, which rose by 1.8%, up from 0.4% the previous month. The higher cost of fruits and vegetables, in particular, contributed to the uptick in food inflation, suggesting that supply chain challenges or seasonal factors may have played a role in the price rises.
On a monthly basis, the consumer price index (CPI) remained unchanged in February, following a 0.2% rise in January. This stability reflects a balance between the sharp decline in energy prices and the modest increase in food costs. Meanwhile, the EU-harmonized inflation rate, which compares inflation across EU member states using a common methodology, dropped by half, falling to 0.9% from 1.8% in January. This marked a four-year low, with the harmonized CPI also remaining flat month-over-month, indicating that inflationary pressures were easing across the broader euro area as well.
Significant reduction in price pressures
Overall, the sharp decline in inflation in France suggests that the country is experiencing a significant reduction in price pressures, particularly from energy and services. This slowdown could offer some relief to consumers and businesses, and it may also influence the European Central Bank's future monetary policy decisions. With inflation at its lowest level in years, policymakers may be able to focus on supporting economic growth while avoiding the need for further tightening.
