Eurozone inflation softened last month, moving away from the European Central Bank’s target as energy costs weakened and the price rises of food and services eased after a spike in May.
The EU’s statistics office Eurostat said yesterday that consumer prices in the 19 countries sharing the euro rose by 0.2 percent year-on-year last month after a 0.3 percent increase in May.
The figure was in line with expectations.
However, far lower-than-expected inflation figures for Germany released on Monday had braced the market for a potentially weaker number.
Excluding volatile energy prices, which were 5.1 percent lower last month than 12 months earlier, consumer prices rose 0.9 percent.
Excluding energy and unprocessed food — what the bank calls core inflation — prices were up 0.8 percent from 0.9 percent in May.
Eurostat’s flash estimate for the month does not include month-on-month calculations.
Under its money-printing quantitative easing scheme, the bank is buying government bonds and other assets to pump about 1 trillion euros (US$1.1 trillion) into the economy, aiming to lift inflation toward its target rate of just under 2 percent.
Quantitative easing is intended to last until September next year.
Capital Economics senior European economist Jennifer McKeown said in a note that the renewed decline in eurozone inflation highlighted that the bank still had a lot of work to do to hit its target in the medium term, with eurozone inflation now below 0.5 percent for a year.
She added that the unemployment rate, unchanged at 11.1 percent in May, suggested that wage growth was unlikely to take off.
ING eurozone economist Teunis Brosens said that May’s spike in core and services inflation had been reversed, implying that there was no trend increase.
However, he pointed to a rise of prices for industrial goods of 0.4 percent, double the rate in May, as a possible sign that the weaker euro, which would make imports more expensive, was having an impact.
Preliminary data for Germany, Europe’s largest economy, on Monday showed that consumer prices there inched up by just 0.1 percent, a steep drop from the 0.7 percent increase in May, while Spanish inflation was flat year-on-year last month following price falls a month earlier.
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