Visibly slower increase in inflation in the euro zone

Consumer price inflation decelerated noticeably in the euro zone in May. The inflation rate – based on the harmonized consumer price index HICP – fell from 1.7% in April to 1.2% in May according to the Eurostat flash estimate. This is largely attributable to a lower increase in prices for services. During the Easter holidays last month, the price of services climbed more than usual. In May, this price increase was corrected again. As the inflation rate for other goods, food and energy was only moderate, the inflation rate as a whole has declined.

At the country level, all economies publishing flash estimates also reported lower consumer price increases. The corrections were particularly substantial in Germany and Spain where the annual rate fell by 0.8 and 0.7 percentage points respectively. In Germany, the inflation rate for May was 1.3% and in Spain it was only 0.9%.

How will things develop from here? With the Easter effect coming to an end, there is currently little indication that inflation will rise again substantially in the coming months. There is unlikely to be an abrupt rise in the price of crude oil and, by extension, in energy prices. On the contrary, given the signs of economic deceleration, the price of crude oil has even fallen again in the last few days. And the effects of the somewhat stronger wage development in the euro zone have also yet to find reflection in consumer prices. Consumer price inflation in the euro area is therefore expected to drift sideways in the coming months amid slight fluctuations.

Rate this article


Thank you for your rating. Your vote:
There is no rating yet. Be the first! Current average rating: 0

Leave an answer

Your e-mail address will not be published. Required fields are marked *