French inflation turns negative

Sale sign in French store Image copyright Getty Images

Inflation in France, the eurozone's second-biggest economy, turned negative in January, adding to worries over deflation in the eurozone.

Prices fell 0.4% from a year earlier, with energy costs down 7.1% following the drop in global oil prices.

It is the first time in more than five years that inflation in France has turned negative.

Last month, the European Central Bank announced a stimulus programme to try to boost growth and avoid deflation.

Figures released last month suggested deflation in the eurozone was gathering pace, with prices across the currency bloc in January down 0.6% from a year earlier.

The ECB aims to keep inflation near to, but below 2%.

'Worrying' sign

While falling energy costs have provided a one-off cut to prices, the worry is that weak economic growth in the eurozone will lead to deflation becoming entrenched.

Falling prices can be harmful to an economy if it leads to consumers and businesses delaying spending and investment decisions in the hope of lower prices in the future.

The last time annual inflation was negative in France was in October 2009, when it hit -0.2%.

Prices in France during January were down 1.1% from December as a result of winter sales.

Yannick Naud, a French fund manager based in the UK, told the BBC that difficulties in the French retail sector were "worrying" and one of the signs that France's economy might be in trouble.

"Discounting around the Christmas period was much heavier than expected by economists.

"If the retail sector is not doing very well and must rely on heavy discounting in order to sell their goods then it might be a negative sign for the economy."

Separately, fellow eurozone member Finland also announced that its inflation rate had turned negative in January.

Prices were down 0.2% from a year earlier, the first negative inflation figure for Finland since January 2010.

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