May: flat m/m, +2.7% y/y
April: +0.6% m/m, +2.8% y/y
March +1.4% m/m, +2.7% y/y
February: +0.4% m/m, +2.4% y/y
January: -0.7% m/m, +2.3% y/y
—

FRANKFURT (MNI) – Eurozone inflation in May was confirmed at 2.7%
on the year, with prices unchanged on a monthly basis, while the core
rate unexpectedly slowed, Eurostat reported on Thursday.

After the downturn in crude prices in early May, energy prices fell
0.6%, but were still 11.1% higher on the year. Excluding energy, HICP
rose 0.1% on the month and was only 1.8% higher on the year.

Excluding energy, food, alcohol and tobacco, HICP slowed to +1.5%
on the year after +1.6% in April.

The core rate preferred by the European Central Bank, which factors
out energy and unprocessed foods, came to +1.7% y/y after April’s +1.8%.

The food component of the HICP registered the strongest impact on
the month. Energy components had the strongest annual impact, as
evidenced by transport fuels, heating oil, electricity and gas prices,
which contributed a total of 0.84 percentage point to the year-on-year
figure.

Consumer prices in Germany fell 0.2% m/m, trimming the annual rate
to +2.4%, while French inflation came to +0.1% and +2.2% for the month
and year, respectively.

In Italy, prices were up 0.2%, resulting in an annual rise of 3.0%.
In Spain, the 0.1% month-on-month dip in prices slowed the annual rise
to 3.4%.

Citing the drop in oil and other commodity prices early last month,
firms polled for the purchasing managers index (PMI) reported a slowdown
in both input and output prices in May.

Selling-price expectations in industry, services and construction
declined to four-month lows in May, according to the European
Commission’s survey. Retailers, by contrast, lifted their price
prospects to the highest level in nearly three years. Consumers’ outlook
for inflation in the coming year declined further in May, while
remaining well above average.

The latest staff projections from the European Central Bank foresee
annual inflation ranging between 2.5% and 2.7% this year and between
1.1% and 2.3% in 2012. This represents an upward revision for 2011,
while the projection for 2012 is essentially unchanged.

“In comparison with the March 2011 ECB staff macroeconomic
projections, the range for HICP inflation in 2011 has been revised
upwards, largely reflecting higher energy prices,” ECB President
Jean-Claude Trichet said earlier this month.

With risks to the price stability outlook on the upside, “strong
vigilance is warranted”, Trichet added, signaling a rate hike for next
month.

The Commission’s projections are similar at +2.6% for 2011 and
+1.8% for 2012.

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

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