Eurozone Inflation Picks Up

Nervousness was very evident in the markets ahead of this morning’s Eurozone Consumer Price Index. The preliminary reading for the month of April has come in at 0.7% year on year, this is a welcome gain on the 0.5% experienced in March but short of the consensus estimate of 0.8%. The Core CPI rose to 1.0% from a reading of 0.7% last month.

Italy has also taken the opportunity to publish updates to it’s consumer prices. The preliminary headline year on year CPI has come in at 0.6%, this is up on the previous reading of 0.4% and precisely meets the market estimate. Month on month Italy’s consumer prices rose 0.2% as expected, this represents an increase on last month’s 0.1%. Additionally Italy has published an EU Norm inflation figure which more closely represents the European Central Bank’s (ECB) preferred measure of the Harmonized Index of Consumer Prices (HICP). Year on year this number is 0.6%, up from last month’s 0.3% but short of the expected 0.5% rise. The month on month version of this statistic is also 0.6%, this is down from last months spurious 2.2% reading but ahead of the 0.5% the market expected.

The ECB is likely to point to today’s pick up in consumer prices as vindication for it’s wait and see approach. Last week ECB President, Mario Draghi, stated that the Bank was expecting a reversal in the inflation trend. More concerning however is that the stated position of the ECB is withhold any monetary loosening action should inflation stabalise. It is difficult to accept that one reading represents a reversal in the trend, particularly as the late Easter holiday this year is likely to have positively impacted on short term price growth activity.

Today’s numbers do not represent the official HICP data on which the ECB bases it’s deliberations, they are however highly correlated and so it is likely that the HICP numbers will also show a rise when published early next month.