September flash: +2.7% y/y

MNI survey median: +2.4% y/y
MNI survey range: +2.3% to +2.6% y/y

August final: +2.6% y/y
—

FRANKFURT (MNI) – Annual consumer price inflation in the Eurozone
accelerated unexpectedly in September to a six-month high of +2.7% on
the back of a sharp rise in energy prices, according to preliminary
figures published Friday by Eurostat.

Food, alcohol and tobacco prices rose a preliminary 2.9% on the
year, down from August’s +3.0% rate, while non-energy industrial goods
prices slowed to a growth rate of +0.8%, compared to +1.1% last month.

Conversely, energy price inflation jumped to +9.2% on the year; 0.3
percentage point higher than in August, while service sector prices rose
2.0%; up from +1.8% previously.

The breakdown of sector-specific price data in the preliminary
report is new for Eurostat, which until last month had limited its
“flash” report to the annual headline HICP figure.

Inflation data for the four sectors will be published in the
preliminary report from now on to help followers of the benchmark
inflation figure better understand what sectors are driving price
increases in Europe, Eurostat said on Thursday.

A more detailed breakdown of the headline figure, which suggests a
monthly rise of around 0.8%, is scheduled to be published October 16.

Energy price developments were also a principal driver in the
German state CPIs this month, though the upward pressure exerted was
less than in August. Lower food price inflation was also noted.

While renewed tensions in the Middle East and North Africa had
helped to boost Brent crude prices to four-month highs and kept headline
inflation stubbornly within the +2.4% to +2.6% range over the past six
months, growing risk aversion has begun to weigh on oil prices.

Barring any unforeseen events, base effects from last summer’s jump
in oil prices should start to put downward pressure on the annual HICP
rate.

Costlier oil and food prices still led to input costs rising in
September at their fastest pace since April, the most recent Eurozone
PMI report showed. But weak demand forced firms to offer further
discounts, bringing output prices down at their fastest pace in over two
and a half years.

The downward trend in selling prices may soon reverse itself,
however. Selling price expectations across all major sectors of the
economy were revised up in September. Expectations in retailing were
above average for the first time since April, the European Commission
reported.

The same Commission report also showed consumers revising up their
view of near-term future inflation to the highest level this year.

The latest ECB staff forecasts published earlier this month point
to inflation ranging between +2.4% and +2.6% this year. For 2013, HICP
is expected to average between +1.3% and +2.5%.

“Risks to the outlook for price developments continue to be broadly
balanced over the medium term,” ECB President Mario Draghi said in early
September.

“Upside risks pertain to further increases in indirect taxes owing
to the need for fiscal consolidation,” he said. “The main downside risks
relate to the impact of weaker than expected growth in the euro area,
particularly resulting from a further intensification of financial
market tensions and its effects on the domestic components of
inflation.”

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

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