French President Emmanuel Macron is confronting a mounting crisis as inflation in France climbed to 2.3 percent in May, driven by sharp increases in food and energy costs.
The latest figures from INSEE France revealed a rise from April’s 2.2 percent, marking a significant turnaround from recent declines.
Food prices accelerated by 1.3 percent in May, up from 1.2 percent in April, snapping a thirteen-month trend of moderation.
This uptick was propelled by a resurgence in fresh food prices, which surged to 3.5 percent from a decrease of 0.7 percent the previous month.
Meanwhile, energy expenses soared by 5.7 percent in May, compared to 3.8 percent in April, primarily due to higher petroleum prices.
On the economic front, France is also grappling with soaring borrowing costs following Macron’s surprise decision to call for snap elections. The 10-year French bond yield spiked to 3.2 percent, its highest level since November 2023, reflecting heightened investor unease.
Vincent Juvyns of JP Morgan said: “The surprise decision to call for snap elections adds to uncertainty, particularly as France could face an EU procedure for excessive deficits later this month.”
Market analyst Tina Teng noted a sell-off in French government bonds and a downturn in stock markets, highlighting investor nervousness.
The prospect of a potential victory by the far-right Rassemblement National (RN) party has further rattled markets, with the CAC 40 index already dropping more than 2 percent on Friday morning. Investors fear the RN’s promised increased spending could strain France’s finances and provoke instability.
James Athey from Marlborough Group expressed concerns over the RN’s fiscal stance, warning: “Even a result which isn’t an outright RN win isn’t likely to be stable at all. And markets hate uncertainty, instability and volatility.”
The combination of economic pressures and political uncertainty poses a significant challenge for Macron as France navigates through turbulent times ahead of the elections scheduled between June 30 and July 7.