Eurozone inflation still negative at 0.1% in May

Eurozone inflation remained in negative territory in May, data showed Tuesday, providing further evidence that the European Central Bank`s unprecedented stimulus efforts are slow to work.

AFP| Updated: May 31, 2016, 18:42 PM IST
Eurozone inflation still negative at 0.1% in May

Brussels: Eurozone inflation remained in negative territory in May, data showed Tuesday, providing further evidence that the European Central Bank`s unprecedented stimulus efforts are slow to work.

Consumer prices fell 0.1 percent in May after slipping 0.2 in April, the Eurostat statistics agency said in a first estimate.

The figures were in line with forecasts compiled by data provider Factset, but some analysts still wondered why rising oil prices had not made more of an impact.

The figures are "weaker than we had expected given the rise in oil prices," said Jonathan Loynes at Capital Economics.

Energy prices were the main downward drag on headline inflation, falling by 8.1 percent after a 8.7-percent April drop.

Core inflation, which excludes products with the most volatile price movements, meanwhile edged up.

Once energy, food, alcoholic beverages and tobacco were stripped out, inflation came in at 0.8 percent in May, up from 0.7 a month earlier.

Loynes predicted that higher oil prices would eventually push headline inflation up, but core inflation was likely to remain "subdued" because of weak wage growth.

He cited eurozone unemployment figures, also released Tuesday, as evidence that upward pressure on wages was still some way off.

Eurostat said eurozone unemployment remained at 10.2 percent in April, its lowest level since August 2011.

But the headline figure hides vast disparities across the euro area, with star performer Germany at 4.2 percent and Greece, suffering from the zone`s highest joblessness, at 24.2 percent, according to Eurostat`s model.

"The figures do nothing to challenge our view that the ECB has more work to do to return eurozone inflation to target on a sustained basis," Loynes said.

The ECB is widely expected to refrain from further rates cuts or stimulus measures when it meets for a regular monetary council meeting Thursday.

The central bank targets an inflation rate of 2.0 percent or just below.