Data from Germany and Spain presented an encouraging picture of the outlook for inflation in the eurozone on Tuesday morning, with unexpectedly strong price growth in Spain and evidence of firm core inflation in the currency area’s largest economy.
Average prices in Spain rose 1.2 per cent in the 12 months to February, well ahead of the 0.9 per cent economists had predicted. Spain’s National Institute of Statistics attributed the rise to a sharp rise in electricity prices.
A wider uptick in inflation would be encouraging news for the European Central Bank, which is wary of a strong euro derailing its progress in bringing about a sustained steady rise in prices.
Regional data from the German state of Saxony also showed a 1.2 per cent in year on year inflation. That actually represents a decline compared to the previous month, but it was driven mainly by volatile food and energy prices, with core inflation ticking up thanks to more expensive package holidays and household appliances.
Claus Vistesen at Pantheon Macroeconomics said “we can’t be sure that the Saxony data mirror the national numbers perfectly, but the details suggest that underlying core inflation pressures remain firm, despite the risk of another headline dip in February”.
Nationwide data from Germany are due out later today, with the year on year rate expected to edge down from 1.4 per cent to 1.3 per cent.