January: -0.7% m/m, +2.3% y/y (revised from +2.4% y/y)
December: +0.6% m/m, +2.2% y/y
November: +0.1% m/m, +1.9% y/y
October: +0.4% m/m, +1.9% y/y
September: +0.2% m/m, +1.8% y/y
ā-
PARIS (MNI) ā Eurozone consumer prices fell 0.7% in January on
cheaper clothing, but energy base effects boosted the annual inflation
rate to a three-year high of 2.3%, revised down 0.1 point from the flash
estimate, Eurostat said Monday.
Early indicators point to a further acceleration in annual HICP in
February and little easing thereafter, if oil prices keep climbing. The
European Central Bank and most analysts expect inflation to remain above
2% for most of this year and much of next year as well.
Energy costs, up 12.0% on the year, remained the main driver of
annual inflation in January, with transport fuels contributing 0.58
point, heating oil 0.19 point, electricity 0.11 point and gas 0.10
point, Eurostat said. Clothing, telecommunications and audio-visual
equipment were all cheaper than a year earlier.
Excluding energy, the annual HICP rate was only 1.3%, unchanged
from December and November. Taking out unprocessed foods as well ā the
core rate the ECB follows most closely ā the annual rate edged up 0.1
point to 1.2%. Other measures of core inflation were also 0.1 higher at
comparable levels.
Eurostat estimated that a change in the treatment of seasonal
products introduced at the start of the year trimmed 0.1 point from the
HICP rate.
The monthly decline in consumer prices was due largely to a 13.3%
seasonal reduction for clothing, which alone slashed 0.71 point.
Retailers also marked down prices for household equipment, while tourism
services were cheaper after the holidays. These reductions offset
monthly increases for food, housing and transport.
Across the Eurozone, annual inflation rates ranged from 0.2% in
Ireland to 4.9% in Greece and 5.1% in Estonia. Among the four largest
economies, inflation accelerated slightly to 3.0% in Spain and to 2.0%,
in Germany, while easing to 1.9% in France and Italy.
February inflation data from reporting German states showed a
further rise in fuel and fresh produce costs and a seasonal spurt in
tourism fees. Germanyās HICP rate rose an estimated 0.2 point to 2.2% in
February. The core rate may have edged up as well, while remaining well
below 2%. Based on these results, analysts expect the Eurozone HICP to
accelerate somewhat as well in February.
Social upheaval in the Middle East and North Africa and the related
risks to oil supplies drove oil prices well over $110 per barrel last
week. The momentum of many other commodities points to mounting price
pressures as well.
The February PMI polls showed factory input prices surging at the
fastest pace in nearly 14 years (85.7). Output prices also accelerated
(60.1), but the feedthrough from commodities is still being dampened by
sluggish demand and economic slack. In the services, prices remained
less dynamic, both for inputs (58.4) and fees charged (52.6).
Over time, more of the recent commodity price surge is likely to
hit shopping carts. High inflation will also fan wage demands, but the
impact should remain muted as long as unemployment remains high.
Still, short-term inflation expectations are mounting and could
begin to extend to longer horizons. While the ECB has made clear it
would react to this, officials are doing their upmost to hold down
medium-term expectations with repeated vows of determination, knowing
that high energy prices will dampen economic growth and that interest
rate hikes would aggravate the solvency risks of highly indebted
governments.
āMonetary policy must prevent a deterioration of expectations in
order to keep the stimulus of international prices from passing through
to domestic prices and wages in the longer term,ā Bank of Italy Governor
Mario Draghi said over the weekend, estimating that a ā20% rise in oil
prices would shave half a percentage point off [Italian] growth over
three years.ā
As hawkish ECB Council members are growing impatient, there could
well be an escalation of anti-inflation rhetoric at their meeting this
week. But if the updated staff projections continue to point to easing
inflation next year, that could delay any rate move for some months.
However, given the uncertainty about oil prices, the upper end of the
forecast range is likely to be far enough above 2% to worry even more
moderate Council members.
āParis newsroom +331 4271 5540; e-mail: stephen@marketnews.com
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