French Inflation Stronger Than Expected But Spanish Prices Wilt

French inflation was stronger than estimated in February while Spanish prices unexpectedly resumed their decline, highlighting the uncertain outlook for the economy as consumers wait for the end of the pandemic.

French inflation was 0.7%, slightly below January’s level but above forecasts for a 0.5% increase. Spain’s rate was -0.1%, lower than all estimates in a Bloomberg survey, as electricity prices slid.

Price pressures are under close scrutiny in the euro area for any sign of impact from the global recovery and U.S. plans for massive fiscal stimulus. The concern is that so-called reflation trades in the market push up borrowing costs more than the euro-area economy -- still weakened by a slow vaccine rollout and extended virus restrictions -- can handle.

French Inflation Stronger Than Expected But Spanish Prices Wilt

France’s central bank governor, Francois Villeroy de Galhau, said last week that there is no risk of overheating in the euro zone, and the European Central Bank will ensure financing conditions remain favorable.

ECB chief economist Philip Lane said Thursday the policy makers will use the flexibility of their emergency bond-buying program to keep government bond yields in check if needed.

In a separate release, France’s statistics agency said consumer spending dropped 4.6% in January after a surge in December when Covid restrictions were loosened. According to the Bank of France, economic activity has stabilized at around 5% below pre-crisis levels at the beginning of 2021.

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.