Eurozone's core inflation rises
By Jan Strupczewski |
May 17, 2011, Tuesday
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Print Edition
Print Edition
ENERGY costs pushed up eurozone inflation in April, but prices jumped as well, confirming European Central Bank concerns about rising inflationary risks and adding to the case for more interest rate rises.
The European Union's statistics office Eurostat said yesterday that consumer prices in the 17 countries using the euro rose 0.6 percent month-on-month. It also confirmed its earlier estimate of a 2.8 percent year-on-year rise, up from 2.7 percent in March.
Stripping out volatile energy and unprocessed food costs to get to what the central bank calls core inflation, prices rose 0.5 percent month-on-month and 1.8 percent year-on-year in April, up from 1.5 percent year-on-year in March and 1.1 percent in February.
"The worrying thing is that second-round effects are really taking place and core inflation is going up. This is a clear signal we will get more rate hikes," said Carsten Brzeski, an ING bank economist.
The ECB raised interest rates in April to 1.25 percent from 1 percent, citing rising inflationary pressures, and economists expect it to raise borrowing costs twice more this year, with the next rise most likely in July.
The ECB wants to keep inflation below but close to 2 percent over the medium term, but economists expect headline inflation to keep climbing from current levels.
"We expect headline inflation to rise further in the coming months. We have eurozone inflation peaking at just above 3 percent in late Q3/early Q4, and have an average of 2.9 percent for 2011," said Eoin O'Callaghan, a BNP Paribas economist.
Eurostat said last month that the price of fuel for transport added 0.56 percentage points to the overall annual inflation rise, heating oil added 0.21 points, electricity 0.12 points and gas 0.09 points. Food, alcohol and tobacco prices rose 0.2 percent on the month and 2.2 percent year-on-year.
"I think the main inflationary pressure so far continues to come from imported price inflation, mainly via commodity prices," said Citigroup economist Juergen Michels.
Separately, Eurostat said the eurozone had a bigger than expected external trade surplus of 2.8 billion euros (US$3.9 billion) in March against market expectations of a 1.5 billion surplus. Adjusted for seasonal swings however, the trade balance was a 900 million euro deficit, Eurostat said.
The European Union's statistics office Eurostat said yesterday that consumer prices in the 17 countries using the euro rose 0.6 percent month-on-month. It also confirmed its earlier estimate of a 2.8 percent year-on-year rise, up from 2.7 percent in March.
Stripping out volatile energy and unprocessed food costs to get to what the central bank calls core inflation, prices rose 0.5 percent month-on-month and 1.8 percent year-on-year in April, up from 1.5 percent year-on-year in March and 1.1 percent in February.
"The worrying thing is that second-round effects are really taking place and core inflation is going up. This is a clear signal we will get more rate hikes," said Carsten Brzeski, an ING bank economist.
The ECB raised interest rates in April to 1.25 percent from 1 percent, citing rising inflationary pressures, and economists expect it to raise borrowing costs twice more this year, with the next rise most likely in July.
The ECB wants to keep inflation below but close to 2 percent over the medium term, but economists expect headline inflation to keep climbing from current levels.
"We expect headline inflation to rise further in the coming months. We have eurozone inflation peaking at just above 3 percent in late Q3/early Q4, and have an average of 2.9 percent for 2011," said Eoin O'Callaghan, a BNP Paribas economist.
Eurostat said last month that the price of fuel for transport added 0.56 percentage points to the overall annual inflation rise, heating oil added 0.21 points, electricity 0.12 points and gas 0.09 points. Food, alcohol and tobacco prices rose 0.2 percent on the month and 2.2 percent year-on-year.
"I think the main inflationary pressure so far continues to come from imported price inflation, mainly via commodity prices," said Citigroup economist Juergen Michels.
Separately, Eurostat said the eurozone had a bigger than expected external trade surplus of 2.8 billion euros (US$3.9 billion) in March against market expectations of a 1.5 billion surplus. Adjusted for seasonal swings however, the trade balance was a 900 million euro deficit, Eurostat said.
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