Eurozone consumer prices increased for the first time in six months in May vindicating that the measures taken by the central bank are helping the economy to move out of deflation.
The harmonized index of consumer prices rose 0.3 percent year-on-year in May after staying flat in April, flash data from Eurostat showed Tuesday. Final data is due on May 19.
This was the first annual increase since last November and also the fastest since October 2014, when prices rose 0.4 percent. Economists had forecast a 0.2 percent increase for May.
The European Central Bank targets inflation below, but close to, 2 percent over the medium term.
The improvement in May was driven by a slower fall in energy prices and increase in other goods and services.
Excluding energy, food, alcohol and tobacco, core inflation accelerated more-than-expected to 0.9 percent from 0.6 percent in the previous month. It was forecast to rise marginally to 0.7 percent.
Jennifer McKeown, a senior European economist at Capital Economics, said May's rise in Eurozone HICP inflation will offer some relief to the ECB, but with underlying price pressures still very weak and the recovery seemingly slowing, strong monetary policy support will be needed for the foreseeable future.
The bank is likely to reiterate after its meeting tomorrow that it will implement its quantitative easing programme in full, she said.
While this strengthening of inflation is good news, it is too early to tell whether euro area really has inflation lift-off, Teunis Brosens at ING Bank NV said. More data is needed to confirm the return of some healthy inflation, the economist added.
However, IHS Global Insight economist Howard Archer said renewed dips into deflation for the Eurozone are looking increasingly unlikely with the risks diluted by a firming in oil prices from their January lows, the weakness of the euro and improved Eurozone economic activity.
Data today showed that costs of food, alcohol and tobacco increased 1.2 percent and non-energy industrial goods prices gained 0.3 percent. Cost of services climbed 1.3 percent. At the same time, the decline in energy prices slowed to 5 percent from 5.8 percent.
Another report from Eurostat today revealed that producer prices continued its downward trend in April. Producer prices dropped 2.2 percent year-on-year after easing 2.3 percent in March.
On a monthly basis, producer prices dropped 0.1 percent in April after rising for two straight months.
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