Thursday, July 7, 2022

Cheaper energy slows euro zone inflation as expected in May

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Euro zone inflation slowed further year-on-year in May, as expected, pulled down by falling energy prices, data from the European Union’s statistics office Eurostat showed on Wednesday.

Eurostat said consumer prices in the 19 countries sharing the euro fell by 0.1% month-on-month for a 0.1% year-on-year rise — as expected in a Reuters poll of economists — a deceleration from 0.3% year-on-year in April and 0.7% in March.

More costly food, alcohol and tobacco added 0.64 percentage points to the final year-on-year reading for May, more expensive services added another 0.59 point and industrial goods added 0.06 point, but a plunge in energy prices subtracted 1.20 point.

Excluding the most volatile elements of energy and unprocessed food prices — what the European Central Bank calls core inflation — prices were flat month-on-month and rose 1.2% year-on-year in May, accelerating from 1.1% in April.

An even narrower measure often looked at by financial markets which also excludes changes in prices of alcohol and tobacco, was also flat month-on-month and unchanged from April at 0.9% growth year-on-year.

The ECB wants to keep the overall headline inflation below, but close to 2% over the medium term.

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