Eurozone1 annual inflation2 is expected to be 2.1% in November 2008 according to a flash estimate issued by Eurostat, the Statistical Office of the European Union. It was 3.2% in October.
The European Central Bank is expected to cut its benchmark rate by at least 0.5% next week after plunges in Eurozone retail sales and economic confidence in November and today's reported fall on inflation.
The ECB can now be confident that it can reach its target rate of "below but close to" 2% by even December.
Economic sentiment in the 15-country Eurozone dived this month to its lowest point since August 1993, the European Commission reported on Thursday. Retail sales fell for a sixth straight month and with inflation falling fast, the ECB will be cut rates Thursday rates from 3.25%t to 2.75% or below - - see separate story.
Computation of flash estimates
Eurozone inflation is measured by the Monetary Union Index of Consumer Prices (MUICP). To compute the MUICP flash estimates, Eurostat uses early price information relating to the reference month from Member States for which data are available3 as well as early information about energy prices.
The flash estimation procedure for the MUICP combines historical information with partial information on price developments in the most recent months to give a total index for the Eurozone. No detailed breakdown is available. Experience has shown the procedure to be reliable (15 times exactly anticipating the inflation rate and 9 times differing by 0.1 over the last two years).
1. The Member States of the Eurozone are Belgium, Germany, Ireland, Greece, Spain, France, Italy, Cyprus, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia and Finland.
2. Annual inflation is the price change between the current month and the same month of the previous year.
3. The MUICP flash estimate usually includes early price information representing approximately 95% of the Eurozone total consumption expenditure weight .
