French Inflation Rate Falls to Lowest in 13 Years

By Sandrine Rastello and Helene Fouquet

May 13 (Bloomberg) -- France’s inflation rate fell to the lowest in at least 13 years in April as oil costs dropped amid the worst economic slump since World War II.

Consumer prices increased an annual 0.1 percent, based on European Union methodology, after a 0.4 percent advance in March, Paris-based national statistics office Insee said today. The April rate was the lowest since the data series began in 1996. Economists polled by Bloomberg News expected a reading of 0.2 percent, according to the median of 14 forecasts.

“Inflation is coming to near a low point and should be negative this summer,” said Olivier Bizimana, an economist at Credit Agricole in Paris. “Given the scope of the economic slump, it’s not impossible that oil prices may fall further in coming months.”

Crude oil is trading around $60 a barrel, less than half the price of a year ago, giving breathing space to households facing rising unemployment. France’s economy is forecast by the European Commission to shrink 3 percent this year as companies slash inventories and trim headcount, pushing the number of jobseekers to the highest in almost three years.

The price of oil products slipped 22 percent from a year earlier, while rising 2.7 percent from March, the report showed. Fresh food products declined 0.7 percent from 12 months ago.

The European Central Bank last week cut its main interest rate by a quarter point to 1 percent, a record low, and approved a plan to buy 60 billion euros ($82.1 billion) of bonds, stepping up its response to the recession.

“Inflationary pressure has been diminishing as money and credit growth have further decelerated,” ECB President Jean- Claude Trichet said on May 7.

Carrefour SA, Europe’s largest retailer, said it will extend price cuts to help revive sales growth and cope with “challenging” business conditions as cash-strapped Europeans defect to discounters.

French consumer prices rose 0.2 percent in April from March, led by the cost of clothing and services such as transportation, Insee said in today’s report, based on national methodology.

To contact the reporters on this story: Helene Fouquet in Paris at Hfouquet1@bloomberg.net; Sandrine Rastello in Paris at srastello@bloomberg.net.