Euro inflation at fastest pace in two years
European inflation accelerated to the fastest in almost two years in September, indicating that companies have leeway to pass on higher costs.
Euro-area consumer prices rose 1.8pc from a year earlier after increasing 1.6pc in August, the European Union statistics office in Luxembourg said today.
That’s the fastest pace since November 2008 and in line with the median forecast of 33 economists surveyed by Bloomberg News.
Crude-oil prices have increased 11pc over the past year, putting pressure on companies to raise prices just as the euro-region recovery shows signs of cooling.
European Central Bank President Jean-Claude Trichet said on September 27 that while inflation should remain “moderate,” risks to the outlook are “tilted slightly on the upside.”
“Oil prices are largely responsible for inflation swings,” said Alexander Krueger, head of capital market analysis at Bankhaus Lampe KG in Dusseldorf, Germany. “But price pressures remain subdued overall and we’re still far from full capacity utilisation in the euro region.”
Today’s report is an initial estimate and the statistics office will release a breakdown of consumer prices on October 15. Core inflation, which excludes volatile costs such as energy, held at 1pc in August from the previous month.
The euro’s 4.9pc drop against the dollar this year has helped boost costs by making imported goods more expensive.
The single currency has been pushed lower partly on investor concern that member states will struggle to rein in deficits.
Governments from Ireland to Portugal have been forced to step up spending cuts, clouding the growth outlook and making consumers less willing to spend as unemployment holds near a 12-year high.
The European Commission said on September 13 that the euro region’s growth rate probably halved to 0.5pc in the third quarter from 1pc in the previous quarter.
European Union Commissioner for Economic and Monetary Affairs Olli Rehn said on that day that a it’s important to remain “vigilant.”
Pierre Pringuet, chief executive officer of Pernod Ricard SA said on September 2 that it’s a “slow recovery.” The maker of Chivas Regal whiskey based in Paris on that day reported full-year profit that missed analysts’ estimates.
The ECB, which aims to keep annual gains in consumer prices just below 2pc, on September 2 forecast inflation to average around 1.6pc this year and about 1.7pc in 2011. Trichet said earlier this week in Brussels that the inflation rate could increase “slightly in the short term.”
The Frankfurt-based central bank will hold its next rate meeting on October 9.