French Luxury and Banking Stocks Advance as Inflation Reaches Two-Year High

Inflation Data Lifts Key French Sectors

French luxury goods and banking shares moved higher on Friday after new economic data showed inflation accelerated to its strongest level in more than two years.

Among luxury stocks, Hermes (EU:RMS), LVMH (EU:MC) and Kering (EU:KER) gained between 2.5% and 4%. Banking shares also performed strongly, with BNP Paribas (EU:BNP), Société Générale (EU:GLE) and Crédit Agricole (LSE:ACA) rising between 1.4% and 3.6%.

Higher Prices Support Banks and Luxury Brands

Investors often view both sectors as beneficiaries of rising inflation.

For banks, stronger inflation can reinforce expectations that interest rates will remain elevated for longer, supporting lending margins and profitability.

Luxury goods companies have historically shown an ability to pass higher costs on to consumers through price increases without significantly affecting demand, particularly among affluent customers. This pricing power can help protect earnings during inflationary periods.

French Inflation Accelerates Further

Data released by France’s statistics agency INSEE confirmed that consumer prices increased by 2.8% year-on-year in May, matching the preliminary estimate published previously.

The reading marked the fastest pace of inflation since February 2024 and represented a further acceleration from recent months.

The European Union-harmonised inflation measure also continued to trend higher, following an annual increase of 2.5% in April.

Core Inflation and Food Prices Move Higher

Core inflation, which excludes more volatile components such as energy and certain food items, rose to 1.5% in May from 1.2% in April.

On a month-to-month basis, consumer prices increased by 0.1%, slowing considerably from the 1.0% rise recorded in April.

Energy prices climbed 0.6% during the month, driven largely by a 10.3% increase in gas prices. INSEE noted that part of this increase was offset by lower petroleum product prices.

Food inflation also edged higher, with fresh produce contributing most significantly to the monthly increase.