Eurozone¹ annual inflation² is expected to be 0.0% in May 2009 according to a flash estimate issued by Eurostat, the statistics office of the European Union was 0.6% in April³.

The annual inflation rate target of the European Central Bank is "below but close to" 2%.

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 (18 times exactly anticipating the inflation rate and 6 times differing by 0.1 over the last two years).

Separately, the European Central Bank announced today that growth in Eurozone money supply moved slightly down in April from the previous month and that the rate of growth in loans to the private sector was sharply lower.

Growth in the ECB's broad measure of money and credit in the economy - -  M3  - -  indicator was 4.9% down from a revised 5.0% in March.

During inflationary periods, the growth of M3 is closely monitored by the central bank.

The decline in the indicator reflects declining demand during the current period of recession. These are currently at a record low of 1.0%.

On a three-month basis that smoothes out exceptional movements, M3 growth fell to 5.2% in the period from February to April from 5.6% in the January-March period, the ECB said.

Growth in lending to the private sector compared with a year earlier fell sharply in April to 2.4% from 3.2% in March, he added.

1. The Member States of the Eurozone are Belgium, Germany, Ireland, Greece, Spain, France, Italy, Cyprus, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia, Slovakia 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.