HICP Y/Y: Oct: 1.9% Sep: 1.8%, Aug: 1.6%, Jul: 1.7%

FRANKFURT (MNI) – Eurozone inflation picked up further in October
to a 23-month high of 1.9%, Eurostat reported on Tuesday, confirming its
flash estimate.

On the month, consumer prices rose 0.4%, slightly more than most
analysts had expected.

Energy inflation accelerated to +0.6% m/m, lifting prices 8.5% on
the year. Food, alcohol and tobacco prices were up 0.1% on the month and
1.7% higher on the year. Excluding these two categories, core consumer
prices posted gains of 0.4% on the month and 1.1% on the year.

The core rate more closely watched by the European Central Bank,
which excludes energy and unprocessed food, increased to 0.4% in
October, giving an annual rate of +1.1% following three consecutive
months of +1.0%.

Boosted by the 11.9% annual rise in transport fuel prices, overall
transport prices led the way in gains, at +4.3% y/y. Other significant
increases were noted in housing maintenance prices, up +3.2% y/y.

Among the larger Eurozone states, the strongest annual inflation
rates were reported in Spain (+2.3%), followed by Italy (+2.0%), France
(+1.8%) and Germany (+1.3%). Outside of the big four economies, Greece
registered the highest annual rate (+5.2%), while Ireland was the lone
Eurozone state to see an annual decline (-0.8%).

The October manufacturing purchasing managers index (PMI) showed
input prices rising at the fastest pace in four months, boosted by
costlier commodities. Adverse weather conditions have affected the
supply of a number of commodities, leading to strong price jumps for
products such as rubber, sugar, orange juice, beer, cotton and various
grains.

Earlier this month, the U.S. Department of Agriculture cut its
estimates for American wheat yields for the third time since September,
while the U.N.’s Food and Agriculture Organisation reported that food
prices were at their highest level since the food crisis of 2007-2008.

Output prices rose only slightly in October, as increases in
industry were partially offset by discounting in the service sector, the
PMI polls showed.

The European Commission’s sentiment survey showed selling price
expectations generally stable in October at levels broadly in line with
or higher than the long-term average in all sectors except for
construction. Consumers’ one-year price outlook was also unchanged,
remaining well below average.

In its most recent monthly bulletin, the European Central Bank
projected that inflation would remain close to current levels before
moderating over the course of 2011. Risks are “slightly tilted to the
upside” due to commodity price developments, it said.

Inflation expectations remain “firmly anchored” in line with the
ECB’s definition of price stability, the ECB said.

Professional forecasters surveyed by the central bank in October
expected inflation to average +1.5% this year and next, below the ECB’s
price stability target level of less than but close to 2%. In the longer
term, the forecasters expected consumer inflation to pick up to +1.9%,
down slightly from +1.95% forecast in July.

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

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