Eurozone Inflation Remains Perilously Low
Eurostat, the Eurozone’s economic statistics bureau, has just released vital inflation data. The headline Eurozone Consumer Price Index (CPI) for the month of May is now reading at 0.5% year on year. This compares to the April number of 0.7% and markets had only been expecting a reading of 0.5% today.
The month on month reading for May is -0.1%, this represents a fall from the previous months 0.2%, the consensus estimate was for this contraction of -0.1% on the month. The Core CPI reading for the month was 0.7%, this more stable ex food and energy number is down from 1.0% on a year on year basis.
The surprise element is limited in these figures following on from the information late last week relating to the individual inflation reports from some of the Eurozone’s largest economies. Germany, on Friday, for example reported a fall in it’s CPI from 1.3% to just 0.9%. Italian data showed a fall from 0.6% to 0.5% while in Spain the CPI halved from 0.4% to just 0.2%.
The fact that today’s overall Eurozone inflation numbers were in a large part predictable does not detract from the fact that inflation is still falling across the bloc. The most concerning element now is that the German price indices are starting to slip back in their rate of growth. Europe’s largest economy has to date lead the way in terms of recovery, and expansion in the German economy has been one of the main reasons that the European Central Bank have been reluctant to embrace full scale monetary easing over the past six months. The slowing in price growth in Germany will now open the way for more determined action from the ECB in the coming months, particularly if the German government ease off on their objections to quantitative easing.
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