French shoppers felt the pinch as consumer price inflation accelerated in May to its highest level since an EU-harmonised data series began in 1997, pushed up yet again by food and energy prices.
Inflation was at 3.7 per cent year-on-year compared with an unrevised 3.4 per cent in April, while in month-on-month terms the index was up 0.6 per cent compared with 0.4 per cent the previous month, statistics office INSEE reported today.
"We're still seeing the predominant effect of energy prices and food prices, it's the same story. Inflation will continue to be high in the coming months, we haven't reached the peak yet," said Olivier Gasnier, an economist at Societe Generale.
Energy prices increased 15.4 per cent year-on-year in May, while food prices were up 5.7 percent in the same period.
Economists said the data could strengthen the case for an interest rate hike by the European Central Bank, which said last week it could raise its main interest rate as soon as July.
Accelerating inflation in France poses a political problem for President Nicolas Sarkozy, who came to power last year promising to boost purchasing power and whose popularity has plunged to record lows over a perceived failure to deliver.
In a headache for the government, fishermen, truckers and farmers have blocked ports, roads and fuel depots for several weeks in protest against a fuel price surge they say threatens their livelihoods.
Fuel prices have risen on the back of a surge in crude oil prices, which shot up to an all-time high of almost $140 per barrel at the end of last week.
French Economy Minister Christine Lagarde has urged the European Union to examine ways of capping value-added tax on oil products when prices rise past a certain threshold as a way of limiting the impact on consumers.
But some of her EU counterparts gave short shrift to the idea.