August: +0.2% m/m, +2.5% y/y
July: -0.6% m/m, +2.5% y/y
June: flat m/m, +2.7% y/y
May: flat m/m, +2.7% y/y
April: +0.6% m/m, +2.8% y/y
—

FRANKFURT (MNI) – Consumer prices in the Eurozone were confirmed to
have risen 2.5% on the year in August, in line with flash estimates,
with core, food and energy price inflation rates unchanged from July,
Eurostat reported on Thursday.

Between July and August, prices rebounded 0.2% as expected, with
rising housing maintenance costs, transport prices and recreation prices
offsetting cheaper food.

On the back of energy’s 11.8% annual gain, transport fuels, heating
oil, electricity and gas once again topped the list of components with
the highest y/y impact, adding 0.94 percentage point to overall
inflation.

Brent crude prices began recovering in late August to reach a near
six-week high of $119.90 in early September, giving an average monthly
rise of 5.3%. But slowing global economic growth could cap the upside
going forward.

In its latest Oil Market Report, the International Energy Agency
projected oil demand to rise by one million barrels per day this year,
but conceded that the gain could be 30% less if global growth surprises
to the downside.

“This latter case is not our ‘most likely’ prognosis, but the
financial and economic headwinds are nonetheless gathering momentum,”
the IEA said.

Despite the 3.2% annual decline in vegetable prices, tobacco’s 4.4%
y/y rise lifted overall food, alcohol and tobacco prices 2.7% on the
year.

Core inflation, which excludes energy, food, alcohol and tobacco
was stable at +1.2% y/y. The European Central Bank’s preferred measure
of core inflation, which filters out energy and unprocessed food prices
was unchanged at +1.5%.

Among the other more heavily weighed components of the index,
housing maintenance prices rose 0.1% on the month to give an annual rise
of 4.9%. Transport prices were also up 0.1% compared to July, lifting
the annual rate to +5.6%.

Food prices dipped 0.2% on the month, but were still 2.6% higher on
the year.

German consumer prices were unchanged between July and August,
lowering annual inflation to +2.5%. In France, consumer prices were up
0.6% and 2.4% on the month and year, respectively.

Spanish prices were unchanged on the month, but up 2.7% y/y. In
Italy, prices increased 0.4% m/m to give an annual rate of +2.3%.

Pipeline pressures in the Eurozone continue to ease. At least one
analyst has predicted that the peak in consumer price inflation may have
passed, though a number predict further increases in the months to come.

The latest PMI poll showed prices charged in the private sector
rose at their slowest pace since November, as slower input price
inflation and sluggish demand weighed.

A European Commission survey showed that companies in all main
sectors had lowered their selling price expectations in August.
Nevertheless, with the exception of the construction sector, the outlook
for selling prices remains above average. Consumers’ view of price
trends for the coming year rose to a three-month high.

Inflation is likely to remain “clearly above” target over the
coming months before falling below 2% in 2012, “on the basis of the path
implied by futures markets for oil prices,” ECB President Jean-Claude
Trichet said earlier this month, adding that risks to the medium term
outlook were “broadly balanced”.

The ECB staff’s latest projections see inflation ranging from 2.5%
to 2.7% this year and between 1.2% and 2.2% for the following year.

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

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