August HICP flash: +1.6% y/y

MNI survey median: +1.6% y/y
MNI survey range: +1.4% to +1.7% y/y

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

FRANKFURT (MNI) – Annual consumer price inflation in the Eurozone
slowed as generally expected in August to 1.6% after reaching a 20-month
high in July, Eurostat reported on Tuesday, citing preliminary
estimates.

A detailed breakdown will not be made available until September 15.
Nevertheless, data from Germany and Spain highlighted further upward
pressure from food prices. Conversely, energy prices decreased in Spain,
while the boost from energy in Germany slowed on the year.

Although oil prices saw modest gains towards the end of the month,
concerns regarding the slowing pace of the global economic recovery in
the second half of 2010 represent downside risks to future oil demand
and thus oil price trends.

“Some economists have also not ruled out a double-dip recession,
which would have a significant impact on oil demand forecasts,” the
International Energy Agency (IEA) said in this month’s Oil Market
Report.

Firms polled for this month’s purchasing managers index (PMI)
reported a further slowdown in input prices (61.8) and output prices
(54.4).

While selling price expectations in the manufacturing sector inched
back above the long-run average in August, the outlook for prices in
other main sectors remained below average, according to the European
Commission, suggesting further easing of pipeline price pressures. The
Commission also noted below-average household inflation expectations for
the coming year.

Consistent with the view of subdued price pressures over the medium
term is the exceptionally slow growth of M3 broad money supply.

The European Central Bank’s monetary analysis shows a moderate
fundamental dynamic of monetary expansion and “from this we can deduce
that inflationary pressure is limited over the medium term,” ECB
Executive Board member Juergen Stark said earlier this month.

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

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