August HICP flash: +1.8% y/y

MNI survey median: +1.8% y/y
MNI survey range: +1.7% to +1.9% y/y

Previous: Aug +1.6%, Jul +1.7%, Jun +1.4%, May +1.6%, Apr +1.5%
—

FRANKFURT (MNI) – Eurozone inflation rose as expected on the year
in September to its highest level in 22 months, Eurostat reported on
Thursday, citing preliminary estimates.

A detailed breakdown will not be made available until October 15.
However, flash estimates out of both Germany and Spain highlighted the
upward impact from energy prices. In some German states, seasonal foods
also lifted annual inflation rates by up to 0.3 percentage points above
the core rate.

Recent VAT hikes in some Eurozone states is also likely to have
boosted inflation. However, the downside surprise in Spain has led some
analysts believe that retailers are absorbing at least part of the added
costs in the short term to remain competitive.

Firms polled in Markit Economics’ most recent purchasing managers
index (PMI) reported input prices rising for the 12th consecutive month
in September at the fastest pace (62.5) since June. Output prices lagged
significantly (53.0), as subdued demand and competition limited firms’
pricing power.

In France, looming tax hikes on products like tobacco and
communication services later this year have led some analysts to project
a 0.2 to 0.3-point increase in inflation rates, including core rates.

The European Commission’s September survey showed that
manufacturers’ selling-price expectations rising the third month in a
row, while, retailers’ price outlook rebounded to the long-term average.
Service providers’ sales price outlook was unchanged in line with the
long-term average.

By contrast, consumers saw price pressures easing and scaled back
their medium-term inflation outlook to the lowest level in five months,
the Commission survey showed.

European Central Bank Governing Council member Yves Mersch
predicted this week that inflation would remain below the ECB’s target
of below, but close to, 2% over the medium term: “We will see inflation
will be around 1.5% or maybe slightly higher in the years to come.”
earlier this week.

The most recent ECB staff projections see average inflation rates
between 1.5% and 1.7% this year and between 1.2% and 2.2% for 2011.

— Frankfurt bureau: +49 69 720 142; e-mail: frankfurt@marketnews.com —

[TOPICS: M$X$$$,MT$$$$,M$XDS$]