Euro zone April inflation revised down to nearly four-year low

By Reuters On May 20, 2020

A deserted shopping street presenting the installation entitled "Umbrella Sky Project" created by Portuguese artist Patricia Cunha is seen in Paris as France begun a gradual end to a nationwide lockdown due to the coronavirus disease (COVID-19), France, May 11, 2020. REUTERS/Charles Platiau

BRUSSELS (Reuters) – Euro zone annual inflation in April was 0.3%, the lowest level in nearly four years, according to final data released on Wednesday by Eurostat, which revised down its earlier estimate as energy prices fell more than initially expected.

The European Union statistics agency had previously estimated that consumer prices in the 19-nation currency bloc rose 0.4% on the year in April, but on Wednesday lowered the figure to 0.3%, the lowest since August 2016.

Headline inflation confirmed its slowing trend since the start of the year, dropping from 0.7% in March, 1.2% in February and 1.4% in January, farther away from the European Central Bank target of a rate below but close to 2% over the medium term.

The revision was caused by a larger-than-expected fall in energy prices, amid the coronavirus crisis and the oil price war between Russia and Saudi Arabia, two major producers of petroleum.

Eurostat said energy prices in the bloc fell 9.7% in April year-on-year, revising down its earlier estimate of a 9.6% drop.

Excluding energy prices, inflation in the bloc rose to 1.4% in April from 1.3% in March, Eurostat data showed, mostly driven by higher prices in supermarkets.

On the year, food, alcohol and tobacco prices went up by 3.6% in April from 2.4% in March, as consumers stocked up on goods during the pandemic.

In the services sector, the largest in the bloc’s economy, inflation was 1.2% in April year-on-year, down from 1.3% in March.

Without the volatile energy and unprocessed food components – what the ECB calls core inflation – prices grew 1.1% on the year, down from 1.2% in March, confirming earlier estimates.

An even narrower measure of inflation that excludes also alcohol and tobacco prices and is followed by many market economists, showed prices going up 0.9% year-on-year, against a 1.0% annual increase in March, in line with previous estimates.

Month-on-month, Eurostat confirmed inflation in the euro zone rose 0.3%.