Energy Drives Upside Inflation Surprise, But Core Looks More Tame

French inflation came in above expectations in August's flash reading: headline CPI at a 3-month high 4.8% Y/Y (vs 4.6% survey) was an acceleration from 4.3% in July, while the HICP headline rate of 5.7% (vs 5.4% survey) quickened from 5.1% prior.

• On a sequential M/M non seasonally adjusted basis, CPI accelerated to 1.0% (0.8% survey), the joint-fastest since March 2022, from 0.1% in July with HICP up 1.1%, joint-fastest since Oct 2022 (1.0% survey), vs 0.0% prior.
• Looking into the details though, core prices looked to have decelerated in August from July's 4.3% Y/Y in HICP - though INSEE does not publish a flash estimate.
• A rise in energy prices (+6.8% Y/Y vs -3.7% in July) - which had been anticipated on the back of higher oil prices and higher regulated electricity prices - was responsible for much of the acceleration, with most other categories steady / decelerating.
• That included food (11.1% Y/Y vs 12.7% Jul), tobacco (9.9% vs 9.8% Jul), manufactured goods (3.1% vs 3.4% Jul), and services (2.9% vs 3.1% Jul).
• On services, INSEE note a downturn in transport and "other service" prices keeping a lid on overall services, which rose 0.1% M/M sequentially after a series record 1.5% in July; manufactured goods were up 1.5% vs -2.3% in July (which had been negatively impacted by an extended sales period).
• Overall, core goods look to have been relatively subdued after a volatile July: Services 0.1% ran at a rate below the 0.2% average for Augusts in the previous decade, suggesting July's jump was a one-off, and goods prices have averaged -0.2% M/M the past 3 months.

Source: INSEE, MNI