French consumer prices fell 0.4 percent in January, giving an annual inflation rate 2.3 percent since January 2011, good news for the economy here which is expected fall into recession in the coming months, according to data from the National Statistics Office (INSEE).
France is undergoing a period of tepid growth and Gross Domestic Product expansion this year is officially forecast to be only 0.5 percent this year, half the level predicted late in 2011.
Consumption, along with exports, is considered to be one of the major engines for economic growth in France and lower prices could help prop up purchasing power in these difficult times.
Nonetheless, the French government has decided to increase sales or Value Added Tax (VAT) to 21.2 percent in October from 19.6 percent now and this is likely to have an impact on consumption but could mostly hurt imports.
INSEE said that the inflation drop in January was attributable "largely to a fall in prices of manufactured products, linked with the winter sales...
(but) this was offset by a strong increase in energy prices." Petroleum product prices rose 3.0 percent in January and have risen 9.8 percent over the past year. France on Tuesday reported record prices at the pump for gasoline due to higher oil prices and a weaker Euro.