French inflation negative for first time since 2009

PARIS (Reuters) - French year-on-year inflation turned negative for the first time in more than five years in January, EU-harmonised data released on Thursday by the INSEE national statistics office showed in a report which pointed to a growing risk of deflation in the euro zone's second largest economy.

French consumer prices fell by 0.4 per cent year-on-year, dragged down by a 7.1 per cent drop in energy prices and 1.4 drop in the cost of manufactured goods. Month-on-month, prices fell by -1.1 per cent in January from December, with winter sales also affecting prices.

The last time annual inflation was negative in the euro zone's second-largest economy was in October 2009, when it hit -0.2 per cent.

Economists polled by Reuters had forecast slightly smaller drops in prices of -1.0 per cent month-on-month and of -0.3 per cent year-on-year.

French core, or underlying, inflation, which excludes the most volatile consumer prices and tax measures as well as public sector prices was flat month-on-month and edged up 0.2 per cent from a year ago as the price of fresh food products increased.

France's Socialist government has repeatedly warned of the risk of outright deflation in the euro zone as part of its campaign for more growth-oriented fiscal and monetary policy in the bloc.