Euro Area: Inflation at over one-year high in March on soaring energy prices
Harmonized inflation came in at 1.3% in March, following February’s 0.9% and marking the highest print since January 2020. Inflation therefore moved closer to, but remained below, the European Central Bank’s target rate of near, but under, 2.0%. March’s result was due a sharp rebound in energy prices and a somewhat faster increase in prices for services more than offsetting softer increases in prices for non-energy industrial goods and for food, alcohol and tobacco.
On a monthly basis, harmonized prices jumped 0.94% in March, following February’s 0.21% increase and logging the strongest rise in two years. Core inflation, which excludes volatile energy and unprocessed foods prices, softened to 1.0% from 1.2% in February.
Commenting on the release, Bert Colijn, senior economist at ING, stated:
“Eurozone inflation continues to increase and will be above 2% for a large part of 2021. […] With supply chains disrupted and commodity prices rising, goods producers have indicated an expected rise in selling prices for the months ahead. Still, with wages weak, fiscal stimulus set to fade and growth expectations slower than in the US, overheating in the eurozone is really not an issue for the moment. Most factors pushing up inflation are temporary or statistical in nature: energy inflation, the German VAT increase and the changes in weights in the inflation basket are important ones to name a few key ones. […] We expect inflation to fall back below 1.5% in the first half of 2022 again.”