France and Spain's CPI slightly below expectations, Eurozone overall inflation converges to 2% target
Inflation rates in France and Spain this month were slightly lower than expected, at 0.8% and 2.7% respectively. Although the inflation rates in both countries are below the expected median, the overall price increase in the Eurozone is unlikely to deviate significantly from the European Central Bank's 2% target. The market expects the European Central Bank to maintain interest rates in September, with consumers showing less concern about inflation. The overall inflation rate in the Eurozone is expected to rise from 2% in July to 2.1% in August. The economic growth in France lags behind similar economies, while Spain performs better
According to the Zhitong Finance APP, the inflation rates in France and Spain this month were slightly lower than expected; however, the data indicates that the overall price increase in the Eurozone is unlikely to deviate significantly from the European Central Bank's 2% target.
Due to a slowdown in the service sector, France's inflation rate fell to 0.8%, while Spain's inflation rate stood at 2.7%. Both countries' inflation rates were 0.1 percentage points lower than the expected median.
Although France's price pressures are weaker than in most Eurozone countries, and Spain's price pressures are relatively greater, the European Central Bank is satisfied with the situation across the region.
Additionally, in the face of trade fluctuations in the United States, the Eurozone economy has shown strong resilience, and the market expects that European Central Bank policymakers will keep interest rates unchanged at 2% for the second consecutive month in September. Currently, investors are no longer fully pricing in expectations for further rate cuts this year.
A survey released by the European Central Bank on Friday showed that consumers in the Eurozone are almost unconcerned about inflation. In July, consumers' inflation expectations for the next 12 months remained stable, with only a slight increase in expectations for the next three years.
On Friday, all four major economies in the Eurozone will release their August price data, with inflation rates in Italy and Germany expected to reach or approach 2%. The overall inflation data for the 20 countries in the Eurozone will be released next Tuesday.
Bloomberg economist Simona Delle Chiaie stated, "We expect the overall inflation rate in the Eurozone to rise from 2% year-on-year in July to 2.1% in August. This moderate increase is mainly driven by the base effect of energy prices and is not expected to trouble the European Central Bank. Looking ahead, as the deflationary pressures from energy prices dissipate, we believe the overall inflation rate will rise again in September and will remain around 2% for the rest of the year."
Economically, France's growth rate has lagged behind similar economies, with long-term political and fiscal uncertainties leading to a decline in business investment and weakening domestic demand. In contrast, Spain is considered the best-performing major economy in the Eurozone.
This week, French Prime Minister François Bayrou suddenly proposed a confidence vote on his budget plan, a move that could trigger another government collapse and further obscure France's economic outlook.
Preliminary data for August inflation shows that the service sector inflation rate, closely monitored by the European Central Bank, slowed from 2.5% in July to 2.1%; industrial goods prices fell by 0.3%, marking the sixth consecutive month of negative growth; energy prices also decreased by 6.2%, although the decline was slightly less than in July.
Another report released by the French National Institute of Statistics and Economic Studies on Friday indicated that consumer spending in July decreased by 0.3% compared to June, influenced by declines in energy and clothing expenditures, which aligns with market expectations
