Energy powers eurozone inflation but growth elusive

AFP, FRANKFURT AM MAIN: Official data showed inflation advancing in major eurozone economies Germany, France, and Spain on Tuesday, but analysts warned that a return to healthy price rises  remains far off.
Inflation in Germany, Europe’s largest economy, hit its highest level in more than three years in December at 1.7 percent year-on-year, the federal statistics authority Destatis said.
It was the fastest pace of inflation since July 2013 and beat the 1.5 percent predicted by analysts surveyed by Factset.
As measured by the ECB’s preferred yardstick, the Harmonised Index of Consumer Prices, German inflation was also 1.7 percent in December.
The German data comes as releases showed HICP inflation in eurozone partners Spain hitting 1.4 percent and France 0.8 in December—up from 0.5 percent and 0.7 percent the previous month.
Consumer prices in three of Europe’s largest economies appeared to advance towards the European Central Bank’s inflation target of just below 2.0 percent after months of stagnation.
The central bank has set interest rates at record lows and pumped money into the economy by buying bonds and offering cheap loans to banks as it seeks to support growth and inflation in the 19-nation single currency area.
But analysts warned that Frankfurt policymakers should stop short of opening any leftover New Year’s champagne.
Rising energy prices pushed that component of the German consumer prices basket up 2.5 percent year-on-year in December, its first rise in more than three years.
France’s Insee statistical agency also pointed to oil prices as a powerful driver of inflation.
Energy has grown more expensive after countries belonging to OPEC agreed to cut oil output in December in a bid to drive up prices.
A long-lasting supply glut saw the commodity plumb lows of less than $30 per barrel in early 2016, returning to $50-plus territory since the OPEC agreement.
Pricier oil “could easily push German headline inflation through the ECB’s 2% ceiling,” analyst Jennifer McKeown of Capital Economics said.  But it will be longer before core inflation—excluding energy and food prices—in Europe’s largest economy reaches such levels.
Meanwhile, “price pressures elsewhere in the eurozone are much weaker,” she noted.
“We’ve avoided the threat of a deflationary spiral, thanks largely to the efforts of the European Central Bank,” said Eric Heyer of France’s OFCE think-tank, but “we are still far away” from the 2.0 percent target.

Energy powers eurozone inflation but growth elusive

AFP, FRANKFURT AM MAIN: Official data showed inflation advancing in major eurozone economies Germany, France, and Spain on Tuesday, but analysts warned that a return to healthy price rises remains far off. Inflation in Germany, Europes largest economy, hit its highest level in more than three years in December at 1.7 percent year-on-year, the federal statistics authority Destatis said. It was the fastest pace of inflation since July 2013 and beat the 1.5 percent predicted by analysts surveyed by Factset. As measured by the ECBs preferred yardstick, the Harmonised Index of Consumer Prices, German inflation was also 1.7 percent in December. The German data comes as releases showed HICP inflation in eurozone partners Spain hitting 1.4 percent and France 0.8 in Decemberup from 0.5 percent and 0.7 percent the previous month. Consumer prices in three of Europes largest economies appeared to advance towards the European Central Banks inflation target of just below 2.0 percent after months of stagnation. The central bank has set interest rates at record lows and pumped money into the economy by buying bonds and offering cheap loans to banks as it seeks to support growth and inflation in the 19-nation single currency area. But analysts warned that Frankfurt policymakers should stop short of opening any leftover New Years champagne. Rising energy prices pushed that component of the German consumer prices basket up 2.5 percent year-on-year in December, its first rise in more than three years. Frances Insee statistical agency also pointed to oil prices as a powerful driver of inflation. Energy has grown more expensive after countries belonging to OPEC agreed to cut oil output in December in a bid to drive up prices. A long-lasting supply glut saw the commodity plumb lows of less than $30 per barrel in early 2016, returning to $50-plus territory since the OPEC agreement. Pricier oil could easily push German headline inflation through the ECBs 2% ceiling, analyst Jennifer McKeown of Capital Economics said. But it will be longer before core inflationexcluding energy and food pricesin Europes largest economy reaches such levels. Meanwhile, price pressures elsewhere in the eurozone are much weaker, she noted. Weve avoided the threat of a deflationary spiral, thanks largely to the efforts of the European Central Bank, said Eric Heyer of Frances OFCE think-tank, but we are still far away from the 2.0 percent target.