French core inflation fell sharply last month, heightening concerns of a deflation trap and putting more pressure on the European Central Bank to respond with monetary stimulus, reports The Daily Telegraph.
French prices fell 0.6pc in January from a month earlier, according to French statistics office INSEE.
The official body said a VAT increase at the start of the year to 20pc from 19.6pc had not offset seasonal falls linked to winter sales and tourism.
Prices of manufactured goods slid 3pc, and clothing dropped 15.4pc as retailers slashed prices to offload stock.
Core CPI inflation, which strips out volatile items and tax changes, fell 0.5 percentage points to 0.1pc on an annual basis, while the Harmonised Index of Consumer Prices (HICP) was unchanged at 0.8pc.
Dominique Barbet, an economist at BNP Paribas said the "collapse" in underlying inflation was significant.
"The release of the January data is when INSEE adjusts the CPI basket every year," he said.
"As we had expected, food and tobacco weights remained roughly unchanged, manufactured goods weighting was diminished, whilst that of energy and services increased. This pattern change should have increased the inflation; the fact it did not happen tells a lot about the disinflationary forces at work within the French economy.
"France is now getting very close to deflation."
Read more of this report from The Daily Telegraph.