March flash: +2.6% y/y

MNI survey median: +2.3% y/y
MNI survey range: +1.9% to +2.5% y/y

February: +2.4% y/y
—

FRANKFURT (MNI) – Consumer price inflation in the Eurozone
surpassed expectations in March, hitting a 29-month high annual rate of
2.6%, preliminary estimates from Eurostat showed on Thursday.

More detailed data, including the monthly HICP change and sector
breakdown, are to be published April 15. The flash estimate points to a
monthly rise of slightly more than 1.1%. National CPI reports from
Germany and Spain highlighted price pressures from costlier energy and
food.

Noting higher food, energy and metals prices, companies polled for
the March purchasing managers index (PMI) reported the strongest jump in
input costs since July 2008.

Output prices also saw strong upward movement this month,
reflecting firms’ “increased success” in passing on their rising costs
to clients, the PMI report added.

Selling price expectations were revised up across all major sectors
of the Eurozone in March, the European Commission survey showed.
Expectations in industry hit their highest point since early 1995, while
expectations in services, retail and construction reached levels unseen
since the onset of the financial crisis.

Consumers also anticipate rising prices in the coming year, as
evidenced by the Commission’s sub-index hitting a near three-year high.

Recent developments in oil markets, due in large part to ongoing
tensions in the Middle East and North Africa as well as the catastrophes
in Japan, point to further upward price pressures stemming from energy.

The latest European Central Bank staff forecasts see inflation
between 2.0% and 2.6% this year and between 1.0% and 2.4% in 2012. The
ranges for both years were shifted upwards due to rising energy and food
prices.

At his press conference in early March, ECB President Jean-Claude
Trichet noted the upside risks to the price stability outlook and called
for “strong vigilance” — a phrase widely viewed as a signal for an
imminent interest rate increase.

Other ECB council members, including Gertrude Tumpel-Gugerell, have
since stressed that a normalization of interest rates is “important”,
while Juergen Stark said that “conditions are there and there are good
reasons to normalise the monetary policy stance.”

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

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