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Eurozone Inflation Rises Unexpectedly In June

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Eurozone inflation accelerated unexpectedly in June as economies across the bloc started to relax coronavirus containment measures, preliminary data from Eurostat showed Tuesday.

Inflation rose to 0.3 percent from a near-four year low of 0.1 percent logged in May. Economists had forecast the rate to remain unchanged at 0.1 percent.

Headline inflation continued to remain well below the European Central Bank's target of "below, but close to 2 percent."

As unemployment is set to continue to rise in the months ahead and output remains well below the fourth quarter of 2019 levels for a long time to come, inflation is unlikely to move anywhere close to the ECB's target of just below 2 percent in the near term, Bert Colijn, an ING economist said.

Excluding food, alcohol and tobacco, core inflation slowed marginally to 0.8 percent from 0.9 percent in May. The rate came in line with expectations.

The increase in headline inflation was entirely due to higher energy inflation, while the core rate edged down and looks likely to fall further over the rest of the year, Jack Allen-Reynolds, an economist at Capital Economics, said.

On a monthly basis, the harmonized index of consumer prices gained 0.3 percent in June.

The decline in energy prices slowed to 9.4 percent from 11.9 percent in May.

Meanwhile, non-energy industrial goods logged a steady price growth of 0.2 percent.
Food, alcohol and tobacco prices climbed at a pace of 3.1 percent after rising 3.4 percent. Likewise, services cost gained 1.2 percent, slower than May's 1.3 percent increase.

Among big-four economies, Germany's harmonized inflation bounced back to 0.8 percent from 0.5 percent in May. On the other hand, French inflation slowed to 0.1 percent in June, the lowest since May 2016, from 0.4 percent in May.

Spain's prices dropped at a slower pace of 0.3 percent after falling 0.9 percent, while Italy's HICP fell at a faster rate of 0.4 percent, following a 0.3 percent drop.

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