Inflation slumps to over three-year low in April on plunging energy prices
Harmonized inflation fell to 0.4% in April from March’s 0.7%, marking the lowest reading since September 2016, according to a flash estimate released by Eurostat on 30 April. Inflation thus moved further below the European Central Bank’s target rate of near, but under, 2.0%. April’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 services and non-energy industrial goods. On the other hand, prices for food, alcohol and tobacco rose at a much faster clip than in March, likely due to panic buying and slower deliveries.
On a monthly basis, harmonized prices rose 0.3% in April, following March’s 0.5% increase. Core inflation, which excludes volatile energy and unprocessed foods prices, inched down from 1.2% in March to 1.1% in the fourth month of 2020.
Commenting on the release, Bert Colijn, Eurozone senior economist at ING, stated:
“For the months ahead, consumers seem to expect higher prices coming out of the lockdown, but businesses have seen selling price expectations decrease markedly. It is possible that supply chain disruptions could cause some prices to temporarily increase but given that unemployment will almost certainly be higher coming out of the lockdown, price pressures are expected to remain weak for some time to come.”
A complete set of data for harmonized inflation will be released on 20 May.