October flash: +2.5% y/y

MNI survey median: +2.5% y/y
MNI survey range: +2.4% to +2.6% y/y

September final: +2.6% y/y
—

FRANKFURT (MNI) – – Consumer price inflation in the Eurozone slowed
much as expected to an annual rate of +2.5% in October, with a
deceleration for energy and non-energy industry goods offsetting a
pick-up for food, alcohol and tobacco, and services, Eurostat reported
on Wednesday.

Annual energy inflation was down to +7.8%, its lowest rate since
July, from September’s +9.1%. Non-energy industry goods prices were up
1.1% on the year, 0.1 percentage point less than in September.

Conversely, food, alcohol and tobacco price inflation picked up to
+3.2%, the strongest annual rate since June. Services inflation returned
to +1.8% after slowing in September.

A detailed breakdown of the annual rate, which suggests a monthly
prise rise of about 0.2%, will be published on November 15.

After hovering between +2.4% and +2.6% for the past seven months,
inflation is likely to slow in the months ahead, reflecting a
combination of waning demand, strong business competition, falling
capacity utilisation, rising unemployment and ongoing economic
uncertainty.

The Eurozone PMI polls showed stiff competition among suppliers
dampening input cost trends somewhat (54.8) in October, while output
prices fell for the seventh consecutive month (48.2).

A European Commission survey showed selling price expectations
softening this month in all sectors except industry and below long-term
averages across the board. Consumers’ inflation worries also eased
somewhat.

Sluggish money supply growth and the ongoing contraction in lending
indicate that even the ECB’s massive liquidity injections do not pose
inflationary risks for the time being.

In fact, ECB President Mario Draghi’s comments last week suggest
just the opposite: “In our assessment, the greater risk to price
stability is currently falling prices in some euro area countries.”

— Frankfurt bureau: +49-69-720 142; email: twailoo@mni-news.com —

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