Euro-Zone Inflation Stalls At Record Low In May

inspector_monkfish

EURO-ZONE MAY CPI +0.1% ON MO; 0.0% ON YR
EURO-ZONE MAY CPI FORECAST 0.0% ON MO; 0.0% ON YR
EURO-ZONE MAY ANNUAL CPI LOWEST ON RECORD
EURO-ZONE MAY CORE CPI 0.0% ON MO; +1.5% ON YR
EURO-ZONE MAY CPI EX-TOBACCO +0.1% ON MO; 0.0% ON YR

10.00 16Jun09 - Euro-Zone Inflation Stalls At Record Low In May


LONDON--The euro zone's annual inflation rate dropped to a record low of zero in May, cementing expectations it will turn negative in the coming months due to the drop in fuel prices over the past year, final official data showed Tuesday.

On the month, inflation slowed to 0.1% in May from 0.4% in April when the year-on-year rate was 0.6%, the European Union's Eurostat statistics agency said. Six of the 16 euro-zone member countries registered negative annual inflation in May.

Economists were expecting zero inflation on the month and on the year in May, according to a Dow Jones Newswires survey of economists last week.

The European Central Bank has said it expects sharp swings in commodity prices over the last year to pull inflation into negative territory temporarily in the coming months before returning to positive territory by the end of the year.

But, in its monthly bulletin last week, the ECB reiterated that short-term movements in the inflation rate weren't relevant from a monetary policy perspective. It said the current level of interest rates was "appropriate" and inflation expectations were anchored with its inflation target of just below 2.0% over the medium term.

Economists say a negative inflation rate is unlikely to herald deflation, defined as a prolonged period of falling prices. Deflation is bad for an economy because it encourages consumers to put off spending in the hope that prices will fall further.

Eurostat said the year-on-year increase in core inflation, which excludes food, tobacco, and alcohol prices, eased to 1.5% in May from 1.8% in April. On the month, core inflation was flat in May.

The breakdown of the figures showed the year-on-year inflation rate was pulled lower by a 19.7% drop in the price of fuels for transport, a 39.5% slump in heating oil costs. On the month, inflation was slowed by falling prices for package holidays and gas.

inspector_monkfish

10:10 16Jun09 Cheap oil brings euro zone May inflation to a halt

BRUSSELS, June 16 - A hefty drop in oil costs brought euro zone inflation to its first ever standstill in May, data confirmed on Tuesday, and economists expect consumer prices to start falling in June.

Separately, the European Union's statistics office said wages in the 16 countries using the euro rose 3.6 percent year-on-year in the first quarter, only marginally below the 3.7 percent growth in the first quarter of 2008

Employment in the 16-country euro zone fell by a record 1.22 million jobs in the first quarter of this year, which many economists believe was the low point of the recession.

Euro zone consumer prices grew by 0.1 percent month-on-month in May and were unchanged year-on-year. Energy prices rose 0.4 percent on the month and fell 11.6 percent on the year, Eurostat said [ID:nBRQ007379].

Price growth excluding energy and unprocessed food -- a measure the European Central Bank calls core inflation -- was zero on the month and 1.5 percent year-on-year, down from 1.7 percent in April.

The ECB wants to keep inflation just below 2 percent and cut its main refinancing rate to a record low of 1 percent in May to help the flow of credit in the economy.

Another measure of core inflation which economists often look at and which excludes energy, food, alcohol and tobacco prices fell to 1.5 percent year-on-year from 1.8 percent.

Belgium, Ireland, France, Spain, Luxembourg and Portugal saw consumer prices fall in May and economists expect more countries will join them in June.

Eurostat data showed wage growth in Germany, the euro zone's biggest economy, jumped to 6.1 percent year-on-year and total labour costs rose 6.6 percent in the first quarter, almost 2.5 times faster than in the first quarter of 2008 and faster than the 4.8 percent jump in the last quarter of 2008.

In Spain, the euro zone's fourth-biggest economy, wage growth showed little impact from surging unemployment with salaries rising 3.3 percent. Wages in France and Greece fell.