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Eurozone inflation remains negative, but core inflation jumps back to 1% - ING

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Mar 31, 2016.

  1. FXStreet_Team

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    Bert Colijn, Senior Economist at ING, notes that the Eurozone inflation has increased to -0.1% in March, in line with analysts’ expectations.

    Key Quotes

    “Core inflation jumped back to 1%, coming from 0.8% in February. This recovery of the core inflation rate is a relief to policy makers, who fear that low energy prices are causing a negative spiral of prices and wages. This release shows that the trend in core inflation remains stagnant, so at least it is not moving towards deflation.

    Just like in February, energy prices contributed very negatively again. Even though the oil price recovered somewhat from the low February levels, energy prices still declined by -8.7% annually as oil prices were still above $60 per barrel in March ‘15.

    Surveys had also indicated a continuing decline in prices. The PMI indicated declining prices both in manufacturing and services in March, although the European Commission economic sentiment indicator showed that selling price expectations did improve somewhat. This adds to the picture that the inflation rate is likely to pick up in the months ahead, as energy price growth starts to contribute less negatively.

    Germany saw price growth move out of deflation territory in March, which was a positive surprise, but the other major Eurozone countries did not follow suit. France, Italy and Spain still experienced declining prices this month, although the monthly growth rates were positive for all three. This shows that there is potential for improving inflation rates around summer time when the negative energy price impact wanes.”
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