French inflation up in May driven by higher energy and food prices

The French inflation report for May was released on Friday morning, coming in at 2.3%, a notch up from preliminary estimates, according to INSEE France. This was also slightly above April’s 2.2%, which was a two-and-a-half year low. Analysts had also estimated May’s figure to remain the same as April. 

This increase in inflation was mainly due to food inflation speeding up at 1.3% in May, up from 1.2% in April. This reversed a thirteen-month streak of slowing food inflation, primarily because of fresh products’ costs rebounding, coming in at 3.5%, up from -0.7% in April. 

Furthermore, energy costs increased to 5.7% in May, up from 3.8% in April, boosted mainly by petroleum items’ prices, which jumped to 2.9% last month, from -0.7% in April. However, services inflation inched down to 2.8% in May, from 3% in the previous month. 

The month-on-month inflation rate was 0% in May, in line with analyst forecasts and a significant drop below April’s 0.5%

Apart from higher inflation, France has also seen borrowing costs soar to their highest level this year, as President Emmanuel Macron called surprise elections to be held between 30 June and 7 July this year. 

The 10-year French bond yield jumped to 3.2%, an increase of 10 basis points, which is also the highest number since November 2023. 

Vincent Juvyns, global market strategist at JP Morgan said, as reported by the Telegraph, “The surprise decision to call for snap elections adds to uncertainty, particularly as France could face an EU procedure for excessive deficits later on this month. 

“Already this morning, one can see the euro trading lower, but I expect the spread between France’s sovereign debt and Germany to grow further.” 

CMC Markets analyst Tina Teng told Euronews,