French, Spanish Prices Tick Up But Not Enough to Worry ECB

France's uptick was driven by services, where inflation climbed to 2.4% from 2.1% in May. Photographer: Jeremy Suyker/Bloomberg Photo by Jeremy Suyker /Bloomberg

Article content

(Bloomberg) — Inflation inched up in France and Spain but not enough to concern European Central Bank officials who are optimistic that their 2% target will be met sustainably this year.

Article content

French prices rose an annual 0.8% in June, up from the more than four-year low of 0.6% recorded in May and just above expectations, statistics agency Insee said Friday. In Spain, they advanced by 2.2% — in line with analyst estimates.

Article content

Article content

Article content

The figures reflect a relatively benign inflation situation across the 20-nation euro zone that’s allowed the ECB to lower interest rates eight times in the space of a year. After a likely dip below target in 2026, the central bank reckons a stronger economy — driven by higher military and infrastructure spending — will lift price growth back to 2% in 2027.

Article content

Article content

President Christine Lagarde has indicated that monetary easing is nearing its end, saying the ECB is well placed to tackle challenges ranging from jolts to global trade to, more recently, the war between Israel and Iran. The economy remains fragile, however, and some of her colleagues aren’t ruling out further reductions in borrowing costs.

Article content

The euro area as a whole will report inflation numbers for June next week. A nowcast by Bloomberg Economics points to a reading of 2% — up from 1.9% in May.

Article content

France’s uptick was driven by services, where inflation climbed to 2.4% from 2.1% in May. Manufacturing prices declined 0.2% for the second consecutive month, while the fall in energy prices was less abrupt.

Article content

The region’s second-biggest economy is losing steam as an unstable political backdrop in which Prime Minister Francois Bayrou’s minority government is trying to push spending cuts hurts sentiment among firms and households.

Article content

Article content

Separate data from Insee showed month-on-month consumer-spending growth slowed to 0.2% in May from 0.5% in April as outlays on food and manufactured goods declined. Still, the reading was slightly ahead of the 0.1% median forecast in a Bloomberg survey.

Article content

Insee said this month that gains in gross domestic product will fall behind the rest of the euro zone in 2025 following two years of outperformance.

Article content

In Spain, faster inflation was mainly due to rising fuel prices, and — to a lesser extent — higher increases in food and non-alcoholic beverages.

Article content

—With assistance from Ainhoa Goyeneche, Harumi Ichikura, Joel Rinneby and Andrej Sokol (Economist).

Article content

(Updates with detail on Spain in final paragraph.)

Article content