Eurozone inflation rates: Easter is casting shadows

After the EMU inflation rate (Harmonised Index of Consumer Prices [HICP]) rose to 2.0% in February, it fell relatively substantially according to flash estimates back down to 1.5% in March. Energy prices once again played a significant role in this development. They have risen by 7.3% year on year. In February, the price-increase rate here was still 9.3%. The inflating effect of the oil price continues to wane. The price of food also rose less strongly than previously. The Easter holiday must also be factored in more strongly in March: this year, Easter falls in April and not in March as was the case in 2016. This has led to the situation whereby, year on year, prices for services have declined pretty clearly. They fell from 1.3% last year to 1.0% this year. However, this clear change in services is not uncommon in years when Easter switches months.

On account of the Easter break, package holidays, transport and accommodation all go up in price. This creates real discrepancies in the inflation measurement year on year. In the past, the shift in Easter dates had led to leaps in the price component services of up to 0.5 percentage points. With this accounting for more than half of the weight of the entire basket, this has already led to a perceptible change in the overall inflation rate. However, this also means that a corresponding countermovement to the growth rate of consumer prices in April is expected under circumstances otherwise the same.

EMU member states which have already presented flash estimates for March have also shown a clearly visible decline in the rate of inflation, particularly in Germany and Spain. In Spain, the rate slipped from 3.0% in February to 2.1% in March, in Germany from 2.2% to 1.5%. Precise details on the HICP are not currently available here, but a glance at the national consumer price index in Germany, for example, reveals a significant decline in prices for services of 0.6% against March 2016. Italian consumer prices fell from 1.6% to 1.3%, while in France the rate of inflation remained unchanged at +1.4%.

So, how will things proceed from here? In April, we expect a correspondingly clear increase in consumer prices. After the distortion caused by the Easter break has subsided, the EMU inflation rate should be less volatile. As the basis effect from energy prices gradually recedes, the price development is expected to weaken slightly later in the year. We are forecasting an average inflation rate of 1.7% for the EMU across the year.

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