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Business

Consumer prices drop for third successive month

Text by NEWS WIRES

Latest update : 2009-08-12

Consumer prices in France dropped in July for the third month running. Officials sought to dispel fears of a deflationary spiral, stressing that the drop reflected seasonal factors.

AFP - French consumer prices fell by 0.7 percent in July from the level 12 months earlier, marking a deflationary step for the third month running, official data showed on Wednesday.
  
On a monthly basis, prices in July fell by 0.4 percent from the figure for June, the official statistics agency INSEE reported.
  
In May, consumer price inflation had shown a negative, or deflationary, move down of 0.3 percent in the first such step since 1957, and this was followed by a fall of 0.5 percent in June.
  
If temporary dips into an absolute fall in prices continue for a sustained period they may mark the onset of deflation, a potentially dangerous cycle of falling prices causing falling demand, a fall in production and a fall in employment and wages, causing a further fall in prices.
  
However, INSEE said that the latest fall in July from the level in June reflected mainly seasonal factors and that, after adjustment for these, the fall was only 0.1 percent.
  
It said that the fall in prices could be explained largely also by a fall in prices for clothing and footwear, for which prices fell by 8.5 percent from the level in June, and for other manufactured goods, owing in turn to the summer sales period in retail outlets.
  
Another factor, which has caused comparative prices to flatten or fall in several countries, was an 18.3-percent drop in energy prices on a 12-month basis. At this time last year, energy prices were near a peak after two to three-years of a strong rise, and this had also pulled up inflation in leading economies.
  
Since the middle of last year, energy prices have dropped sharply, and even in July they were 1.0-percent lower than in June.
  
Food prices also fell in July by 0.7 percent from the level in June and by 1.1 percent on a 12-month comparison.

Date created : 2009-08-12

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