Eurozone Inflation Slows Less Than Expected; Core Price Growth Accelerates

eurozoneflag feb01 02mar23 lt

Euro area inflation slowed less than expected, while core price growth continued to gain strength in February in the face of strong labor market conditions, strengthening the case for a long path of rate hikes from the European Central Bank even as energy prices stayed on downward trend.

The harmonized index of consumer prices rose 8.5 percent year-on-year in February, which was the slowest since May 2022.

However, the rate was only marginally below January's 8.6 percent and also above economists' forecast of 8.2 percent.

Meanwhile, core inflation that excludes energy, food, alcohol and tobacco, accelerated to 5.6 percent from 5.3 percent. Core inflation was expected to remain unchanged at 5.3 percent.

Some forward-looking indicators for inflation are improving but the faster pace of underlying inflation means the ECB has no reason to stop hiking anytime soon, ING economist Bert Colijn said.

Capital Economics' economist Jack Allen-Reynolds said the firm has been forecasting a 50 basis point hike at the March meeting and another in May, but now further hikes at later meetings look increasingly likely.

The ECB had raised its benchmark rate by 50 basis points at the February meeting and signaled another similar increase at the March meeting.

On a monthly basis, the HICP climbed 0.8 percent in February, flash data showed. Final data is due on March 17.

There was a sharp increase in food, alcohol and tobacco prices, which climbed 15.0 percent after a 14.1 percent gain in January. At the same time, the increase in energy prices eased to 13.7 percent from 18.9 percent.

Non-energy industrial goods prices moved up 6.8 percent, slightly faster than the 6.7 percent rise in the previous month. Likewise, the growth in services cost rose to 4.8 percent from 4.4 percent.

Among big-four economies, only Italy registered a slower inflation. Italy's harmonized inflation eased to 9.9 percent from 10.7 percent.

Meanwhile, Germany's harmonized inflation rose to 9.3 percent from 9.2 percent a month ago. Similarly, France's inflation climbed to 7.2 percent from 7.0 percent and Spain's rate increased to 6.1 percent from 5.9 percent a month ago.

The euro area unemployment rate remained unchanged at 6.7 percent in January, another report from Eurostat showed. This was down from 6.9 percent in the same period last year.

The number of unemployed decreased 220,000 from the last year to 11.288 million in January.

The youth unemployment rate rose slightly to 14.4 percent in January from 14.3 percent in the previous month. There were 2.286 million unemployed youth.

For comments and feedback contact: editorial@rttnews.com

Economic News

What parts of the world are seeing the best (and worst) economic performances lately? Click here to check out our Econ Scorecard and find out! See up-to-the-moment rankings for the best and worst performers in GDP, unemployment rate, inflation and much more.

Follow RTT