29 Apr 2016
Eurozone inflation dips below zero, again - ING
Teunis Brosens, Senior Economist at ING, notes that the Eurozone core inflation remains dead in the water at 0.8% and with increasing oil prices, inflation will start to move up in the second half of the year.
Key Quotes
“Eurozone headline inflation clocked in at -0.2%YoY in April from 0.0% in March. Core inflation disappointingly fell back to 0.8%YoY in April, from 1.0% in March, confirming that the occasional 1.0% readings we got earlier this year were one-offs due to the timing of holidays and did not signal a pickup in core inflation.
While the negative headline attracts most attention, the weak core inflation is more interesting. Core inflation has been hovering around 0.9% for a year now, and shows no sign at all of going anywhere else. Pessimists will see their fears of persistent lowflation confirmed, while optimists may point out that low oil prices have not yet produced a negative wage-price spiral leading to a further weakening of core inflation.
Despite flatlining core inflation, we could very well see the end of zero headline inflation in a few months’ time. With oil prices up from Q1 lows, the negative contribution of energy prices to inflation should diminish in the second half of the year. In fact, we are on course to hit 1.0% by the end of the year.”
Key Quotes
“Eurozone headline inflation clocked in at -0.2%YoY in April from 0.0% in March. Core inflation disappointingly fell back to 0.8%YoY in April, from 1.0% in March, confirming that the occasional 1.0% readings we got earlier this year were one-offs due to the timing of holidays and did not signal a pickup in core inflation.
While the negative headline attracts most attention, the weak core inflation is more interesting. Core inflation has been hovering around 0.9% for a year now, and shows no sign at all of going anywhere else. Pessimists will see their fears of persistent lowflation confirmed, while optimists may point out that low oil prices have not yet produced a negative wage-price spiral leading to a further weakening of core inflation.
Despite flatlining core inflation, we could very well see the end of zero headline inflation in a few months’ time. With oil prices up from Q1 lows, the negative contribution of energy prices to inflation should diminish in the second half of the year. In fact, we are on course to hit 1.0% by the end of the year.”