Global Daily – Eurozone core inflation to remain close to 1%

by: Aline Schuiling

Euro Macro: Eurozone core inflation to remain close to 1% – A number of eurozone countries published inflation data for June today. In Spain the harmonised HICP inflation rate declined to 0.6%, down from 0.9% in May. Germany reported stable HICP inflation at 1.3%. Finally, Belgium did not yet publish the harmonized inflation rate, but only inflation according to the national definition, which declined to 1.7%, down from 1.9% in May. The break-down in main components (available for Belgium and for Germany’s main regions) shows that energy prices had a downward impact on inflation, whereas the main upward impact was due to the price of holidays and hotels. Spain’s statistical bureau only published a qualitative breakdown of inflation, which mentioned that the decline in harmonised inflation was largely due to the energy component. Eurostat will publish the first estimate for eurozone inflation on Friday. The data for the three individual countries suggest that headline inflation stabilised at 1.2% while the core rate increased to 0.9% from 0.8%. Looking further ahead, we expect core inflation to continue to hover around 1% during the rest of this year and next against the background of weak economic growth. Headline inflation, in contrast, should decline in the coming months on the back of a decline in energy price inflation on the back of base effects in oil prices. (Aline Schuiling)