Eurozone year-on-year inflation fell sharply in March to 6.9%, well below the 8.5% recorded the previous month. The new preliminary data published by the community statistics office thus chains five months of continuous falls since October, which feeds the hope that the rise in prices in the euro area has peaked.
However, the relief may be limited since underlying inflation (that which takes into account those prices that are not subject to significant volatility) has remained stable. Excluding food and fuel prices, this indicator rose slightly from 5.6% in February to 5.7% year-on-year. The rise was driven by the increase in the prices of processed foods and industrial goods, although a slight drop in the services sector moderated the pressure.
By components, according to Eurostat, energy is largely responsible for the drop in the general data, with a drop of almost one percentage point (0.9%) year-on-year. In the opposite direction, food, alcohol and tobacco registered an increase of 15.4% year-on-year. The concern is that this data is higher than that registered in February, when it was limited to 15%.
The data published this Friday is slightly better than analysts’ expectations. The Bloomberg Economics estimate maintained that inflation in the euro zone would close March at 7%, while it forecast that core inflation would reach 5.7% thanks to the rise in food prices. A survey conducted by the news agency Reuters He even estimated that the indicator would stand at 7.2%.
In the information by country, Luxembourg once again registered the lowest inflation in the community bloc with 3%, followed by Spain with 3.1%. Faced with the situation of both countries, the States with the highest inflation are Latvia (17.3%), Estonia (15.6%) and Lithuania (15.2%).
France and Germany, with mixed prospects
Shortly before the Community agency released its data, the French statistics agency released the national data for March. The price increase eased in March to its lowest level in six months, helped by falling energy prices. Consumer prices rose 0.9% in March, bringing the year-on-year inflation rate to 6.6%, up from 7.3% in February.
German inflation also eased in March due to lower energy prices, but, as in France, it was still above analyst forecasts. This increases the pressure on the European Central Bank to continue tightening its monetary policy.
Despite the good data, analysts remain skeptical about the future. “Has the disinflationary process begun? We think not,” says a note from the Dutch bank ING signed by its Macro boss, Carsten Brzeski. In the case of the German economy, “the underlying pressures continue to be high and the fact that the month-on-month variation was above the historical averages is no reason to rejoice,” the analysis highlights.
The European Central Bank (ECB) expects the decline in inflation to accelerate from the second half of the year, once the increase in regulated energy prices and the agreement on food prices are further behind. Regarding monetary policy, the president of the ECB, Christine Lagarde, has already announced that “we are not committed to continue raising rates nor have we finished doing so”.
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