Following the volatile start to the year, the development of EMU consumer prices has become more sedate again. The inflation rate fell slightly from +1.4% in May to +1.3% in June according to the Eurostat flash estimate. Once again, this decline was attributable to falling energy prices. Here, the annual rate fell from +4.5% to +1.9% in June. In terms of the other components in the shopping baskets of European consumers, however, there was only minimal movement. As the year progresses, we expect the Eurozone inflation rate to rise moderately overall.
Flash estimates from the major member states also primarily indicate a more or less pronounced decline. In France, the inflation rate fell from +0.9% to +0.8%, while in Italy the decline was from +1.5% to +1.2% and in Spain from +2.0% to +1.6%. The German inflation rate remained stable at 1.5%.
In the light of a crude oil price which has since fallen to below USD 50 again, it is little wonder that consumers’ wallets are feeling the benefit at petrol stations. In addition, prices for food and unprocessed food are not rising as strongly as before. Especially at the turn of the year, the cold weather led to crop failures in southern European cultivation regions and caused food prices to rise significantly. The last of this effect seems to have now departed. Moreover, the consolidated external value of the euro for imports is dampening price hike tendencies.
For H2 2017 there is nothing to currently suggest that the EMU inflation rate could rise again significantly. The crude oil price seems to be rather unaffected by the political crisis in Qatar at the moment. And this is despite the ongoing efforts from OPEC (Organization of the Petrol Exporting Countries) to raise the oil price via agreed extraction limits. The domestic price pressure within the Eurozone remains limited in the face of a still elevated yet gradually decreasing unemployment level and a negative output gap which is only being closed bit by bit. Against this backdrop, the inflation rate will, at most, only increase very slightly over the course of the rest of the year.