Deflation slowed as Eurozone annual inflation rose to -0.2% in August 2009 according to a flash estimate issued by Eurostat, the EU statistics office. It was -0.7% in July.
Oil prices are down about 40% from this time last year but they have more than doubled from a February low of $34 a barrel. As the recovery gathers pace, they will inevitably rise.
On Friday, a report from the European Commission showed that consumers in Europe anticipate prices will fall more steeply in the next year than they did in July, while companies’ projections are less negative than a month ago. The measure of consumers’ price expectations over the next 12 months fell to minus 16, the lowest since the data were first compiled in 1990.
The Eurozone may have returned to growth in the current quarter, after its two biggest economies, Germany and France, grew in the second quarter,
The European Central Bank, which has an inflation target of "below but close to 2%," will be closely monitoring price pressures as the recovery takes hold.
The ECB is unlikely to change its benchmark rate from the current level of 1% until the second half of 2010.
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 available4 as well as early information about energy prices.
Eurostat says 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 (17 times exactly anticipating the inflation rate and 7 times differing by 0.1 over the last two years).
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.
