French inflation rises 4.1% in December, as expected

PARIS (Reuters) -French consumer prices rose in December in line with expectations, preliminary data from the national statistics body showed on Thursday, due to an increase in energy and services prices over the year.

The preliminary figures from INSEE showed EU-harmonised annual inflation at 4.1%, up from 3.9% in November. That matched analysts’ average forecast in a Reuters poll.

The rise in energy and services prices accelerated to 5.6% and 3.1% respectively, after increases of 3.1% and 2.8% respectively the month before.

“World oil prices are at a similar level to last year, but since then the price of electricity has risen and the rebate at the pump has been withdrawn”, Asterès analyst Sylvain Bersinger said in a note. He expects energy prices to continue rising in the coming years.

Inflation in services “is more worrying, as services account for half of the consumer price index”, he added. The data could show the impact of wage increases, as they “are beginning to be passed on significantly in prices”.

On the other hand, food price growth slowed to 7.1% year-on-year in December from a 7.7% increase in November – an “expected” trend, Bersinger said.

The French government hopes to secure lower prices on food and other products for consumers this month as it moved the deadline for negotiations between retailers and producers to Jan. 15 from March 1.

The usual three-month window was shortened as the 10% average increase agreed for 2023 locked in high prices in French supermarkets even as global food commodity prices have tumbled, spurring consumers to cut back on purchases.

During the negotiations, Carrefour said on Thursday it would no longer sell PepsiCo products, such as Pepsi, Lipton, and Doritos, as the snacks and beverages giant is asking for “unacceptable price increases,” the French retailer said.

(Reporting by Gaëlle Sheehan and Clément MartinotEditing by Piotr Lipinski and Mark Potter)