FXStreet (Barcelona) – Teunis Brosens of ING, reviews the Eurozone inflation data release, noting that although the 0.3%yoy rise in HICP inflation gives a positive signal for inflation, it is too early to confirm a positive return from deflation.
Key Quotes
“Reports of the death of Eurozone inflation have been greatly exaggerated. Today’s Eurostat flash estimate shows that Eurozone HICP inflation rose to 0.3%YoY in May (from 0.0% in April), higher than expected. While a pickup in food price inflation and a smaller negative contribution from energy prices certainly helped, the real story here is the strengthening of core inflation.”
“Core inflation has been flat around 0.6-0.7% since September last year. In May however, core inflation suddenly jumped to 0.9%YoY. The jump is also reflected in services price inflation, bouncing back to 1.3%YoY in May from an all-time low of 1.0% in April.”
“While this strengthening of inflation is good news, it is too early to tell whether we really have inflation lift-off.”
“Last week’s Economic Sentiment Survey by the European Commission still showed weak selling price expectations in the services and retail sectors. More data is therefore needed to confirm the return of some healthy inflation.”
“But for now, these inflation numbers fit the image of a slowly recovering Eurozone economy and quantitative easing policies that are having the desired effect.”
(Market News Provided by FXstreet)