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France
 The highest inflation rate since 1991

France’s consumer price index (the national measure) rose 0.5% in May, or 3.3% year-on-year after 3% in
April. The core index increased 0.1% over the month, or 2% year-on-year (unchanged from April). The
ex-tobacco index climbed 0.5%, or 3.3% year-on-year (3% in April), while the harmonised price index
rose 0.6%, or 3.7% year-on-year (3.4% in April).

The components contributing the most to the jump in the year-on-year inflation rate were energy (1.21
points), services (1.02 points), food (0.94 point), tobacco (0.11 point) and manufactured products (0.05
point). The energy price index surged 4.2% in May, or 15.4% year-on-year. Food prices rose 1% over the
month, reflecting price increases for fresh produce. Fresh fruit prices rose 9.5%, while fresh vegetable prices
increased 5.5%. All in all, food prices rose 5.7% year-on-year in May, after 5.2% in April. Services prices
climbed 0.1% in May, or 2.4% year-on-year, while the prices of manufactured products were unchanged during
the month and up 0.1% year-on-year.

The acceleration in inflation left it at its highest level since 1991, and it remains higher than that for the
euro zone. The latest increase in oil prices will sustain inflation right into year-end and has prompted us to
revise our inflation forecasts higher. There is one positive development, however, and it concerns the
prices of processed (i.e. not fresh) food. Driven higher by soaring prices for agricultural commodities,
their inflation rate has been slowing since a peak in January. From a 1.2% increase in that month alone,
they have decelerated steadily to just a 0.2% gain in May. The transmission of past price increases in
agricultural commodities appears to be drawing to a close.

Inflation back up to its 1991 level but a Processed food prices decelerate
stabilisation in the core rate

Sources: INSEE, HSBC Sources: INSEE, HSBC