Eurozone inflation returns to dispel deflation concerns
Azad Zangana, senior European economist at Schroders, comments on today’s eurozone inflation data
The eurozone’s flash estimate for the harmonised consumer price index (HICP) showed an annual increase of 0.3% in May – the first increase since November 2014, backing up our view that deflation is not a major concern for the region.
HICP inflation was a little higher than consensus estimates of 0.2%, but remains low enough to warrant caution. Lower global energy prices have been dragging eurozone inflation lower for some months now, and continue to make a negative contribution worth about 0.7%. Inflation in food, alcohol and tobacco had also been a drag at the start of the year; however, inflation in these sub-indices has been rising lately, partly reflecting the recovery in the region’s growth, but also partly due to the depreciation in the euro in recent months.