Euro Area: Inflation slumps to nearly four-year low in May as energy prices continue to fall

Euro Area Inflation May 2020

Euro Area: Inflation slumps to nearly four-year low in May as energy prices continue to fall

Harmonized inflation fell to 0.1% in May from April’s 0.3%, marking the lowest reading since June 2016, according to a flash estimate released by Eurostat on 29 May. Inflation thus moved further below the European Central Bank’s target rate of near, but under, 2.0%. May’s further drop was again mainly due to a much sharper fall in energy prices, and to a lesser extent to slower price increases for food, alcohol and tobacco and non-energy industrial goods. On the other hand, prices for services rose at somewhat faster clip than in April.

On a monthly basis, harmonized prices dipped 0.1% in May, contrasting April’s 0.3% increase. Core inflation, which excludes volatile energy and unprocessed foods prices, was stable at April’s 1.1%.

A complete set of data for harmonized inflation will be released on 17 June.

Commenting on the release, Bert Colijn, Eurozone senior economist at ING, stated:

“The severe economic fallout is having a deflationary effect, which means the ECB is likely to stay in a crisis-fighting mode for some time to come.”

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