Eurozone Inflation Returns To Positive Territory

04:39, 30th June 2016

(RTTNews) - Helped by a slower decline in energy prices, Eurozone inflation turned positive in June, according to provisional data published Thursday.

Prices in Germany and France increased from last year, while Spain and Italy continued to have negative inflation.

Eurozone consumer prices edged up 0.1 percent in June from a year ago, offsetting a 0.1 percent fall in May, Eurostat said Thursday.

This was the first increase in five months. Prices were expected to remain flat in June.

Headline inflation has been below the European Central Bank's target of 'below, but close to 2 percent' since early 2013.

Core inflation that excludes energy, food, alcohol and tobacco rose to 0.9 percent in June from 0.8 percent in May. This was the fastest rate since March 2016. Economists had forecast core inflation to remain at 0.8 percent.

The statistical office is slated to issue the final data on July 15.

Energy prices slid 6.5 percent in June after declining 8.1 percent in May. The cost of food, alcohol and tobacco remained at 0.9 percent. Services costs climbed 1.1 percent following a 1 percent rise.

Unless oil prices drop back sharply, headline inflation will undoubtedly climb further over the coming months as negative energy effects finally fade, Jennifer McKeown, a senior European economist at Capital Economics, said.

As core price pressures remain weak largely due to the weakness in wage growth and uncertainty over the effects of Brexit, the ECB will need to do more if it is to hit its inflation target, the economist added.

The increased package of ECB's quantitative easing has only taken effect this month and the return to price growth in June will be considered a positive sign in Frankfurt, Bert Colijn at ING Bank NV, said.

This gives the ECB some time to assess the impact of the British EU referendum more thoroughly as things unfold, the economist noted.

Among major economies, German inflation rose to 0.3 percent in June, the fastest pace in three months, from 0.1 percent. At the same time, French consumer prices grew 0.2 percent after stabilizing in the previous month.

Meanwhile, Italy consumer prices continued to decline in June. Prices dropped 0.4 percent year-over-year in June. Similarly, Spain's prices decreased for the sixth consecutive month. The index slid by 0.8 percent.