Eurozone Inflation Slows On Energy Prices

Eurozone inflation slowed more-than-expected in March largely driven by falling energy prices as the spread of coronavirus pulled down economic activity, flash data from Eurostat showed Tuesday.

Inflation eased to 0.7 percent from 1.2 percent in February. The rate was expected to slow to 0.8 percent. A similar lower rate was last seen in October.

Headline inflation continues to remain well below the European Central Bank’s target of “below, but close to 2 percent.”

Core inflation that excludes energy, food, alcohol and tobacco, slowed to 1 percent from 1.2 percent in February. The rate was forecast to remain unchanged at 1.2 percent.

The enormous shock to oil prices has been one of the most important stories of the month and that feeds through to Eurozone inflation, Bert Colijn, an ING economist said.

Most of the lockdown period after the outbreak of coronavirus is not taken into account, but these numbers confirm caution in the service sector ahead of the more severe economic disruption in the latter part of the month, the economist noted.

Data showed that energy prices plunged 4.3 percent, while food price inflation accelerated to 3.5 percent from 2.6 percent. Services cost gained at a slower pace of 1.3 percent and non-energy industrial goods prices logged a steady growth of 0.5 percent.

On a monthly basis, the harmonized index of consumer prices gained 0.5 percent in March. Final data is due on April 17.

All big-four euro area economies reported a slower inflation in March. Germany’s harmonized inflation eased to a four-month low of 1.3 percent from 1.7 percent. France’s inflation slowed notably to 0.7 percent from 1.6 percent.

Spain’s inflation fell to 0.2 percent from 0.9 percent in the previous month and Italy’s inflation came in at 0.1 percent versus 0.2 percent last month.

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