French Economy Sees Unexpected Contraction and Lower Inflation

According to Yahoo News, France's economy experienced an unexpected contraction in the third quarter, while inflation in November decreased more than anticipated. This has led investors to increase their bets on the European Central Bank (ECB) cutting interest rates in the spring. French statistics agency Insee revised the previously reported 0.1% expansion for the three months through September to a 0.1% decline. Inflation eased to 3.8% this month, the lowest level since the beginning of last year, following October's 4.5% reading. Analysts surveyed by Bloomberg had expected a 4.1% increase. As price gains decrease across Europe and the region faces a potential recession, money-market traders are fully pricing a first cut in the ECB's deposit rate for April, earlier than officials in Frankfurt have suggested. The decline in inflation supports the ECB's decision to stop raising rates last month. However, officials have cautioned that they are not in a hurry to begin cutting. Inflation in France has slowed down more gradually than in other parts of Europe due to the government partially lifting caps on electricity costs. In November, services inflation slowed to 2.7% from 3.2% in October, and manufactured goods price increases declined to 1.9% from 2.2%.