Easter effect squeezes Euroland inflation rate slightly to 1.4 percent

The Euroland inflation rate hardly moved in March. According to Eurostat’s preliminary calculations, consumer prices were 1.4 percent up on the prior-year month. In the previous month, the annual rate had been slightly higher at 1.5 percent, whereby the eased upward pressure is attributable to service sector prices. This is possibly caused by the comparatively late date for Easter this year, namely 21 April. This is also discernible in the core rate, which excludes the more volatile elements of food and energy prices and fell 0.2 percentage points to 1.0 percent.

Last year, Easter was on 1 April and the Easter holidays therefore largely began as early as March. Prices in the hotel and accommodation segment as well as for transport services were thus accordingly higher in March 2018. This then brakes the climb in service prices in March 2019. And it also means, of course, that we can expect a corresponding opposite effect in April 2019 when the inflation rate could as a whole turn out a little higher. That said, it would presumably be a non-recurring effect and is unlikely to significantly change the ongoing moderate level of inflation of well below 2.0 percent.

The Euroland inflation rate thus not only remains below the European Central Bank’s target, but as measured in March is the lowest in 11 months. The interim price hikes, with inflation rates hitting 2.0 percent and more in the late summer and autumn of 2018, can largely be attributed to the price of crude oil, which peaked at over USD 80 a barrel. This factor is likely to only have limited scope to drive the inflation rate higher in the course of the present year. Pricing pressures in the domestic economy are also unlikely to be more pronounced. The noticeably slower momentum of the economy speaks against that happening, to mention just one reason. Overall, the March inflation data are in line with our forecast. For 2019 as a whole, we continue to expect Euroland consumer prices to rise 1.4 percent on the year.

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