March 12, 2015 / 7:52 AM / 2 years ago

French consumer prices fall year-on-year in February

PARIS, (Reuters) - French consumer prices fell again year-on-year in February after registering their first decline in over five years in January, data showed on Thursday, underlining the challenge the European Central Bank faces in meeting its inflation target.

The annual fall of 0.3 percent came despite a 0.7 percent month-on-month rise which the INSEE statistics office said was largely due to seasonal increases in prices after the end of the winter sales.

The data were largely in line with expectations. Economists polled by Reuters had forecast an increase of 0.6 percent month-on-month and a negative rate of 0.4 percent year-on-year. In January, prices fell 0.4 percent on an annual basis.

INSEE said a rebound in prices for oil-based products and a new increase in the price of fresh produce contributed to the monthly rise in February.

Despite the negative inflation rate, economists agree that France remains far from actual deflation, when consumers and business start deferring spending on the basis that goods will be cheaper months later.

French EU-harmonised inflation fell to a historical low of -0.8 percent in July 2009 and hit a high of 4.0 percent in July 2008, according to INSEE's records going back to 1991.

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Reporting by Mark John; editing by Geert De Clercq

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