Euro zone back to inflation as May prices beat forecast

Tue Jun 2, 2015 6:14am EDT
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By Jan Strupczewski

BRUSSELS (Reuters) - The euro zone returned to inflation in May with a higher than expected increase in consumer prices after five months of falls and stagnation, due to rising food costs and the waning impact of cheap energy.

The European Union's statistics office Eurostat said on Tuesday consumer prices in the 19 countries sharing the euro rose 0.3 percent year-on-year last month after a flat reading in April, beating market expectations of a 0.2 percent increase.

The Eurostat estimate does not contain monthly data, but the annual data showed that more expensive unprocessed food and services had the biggest upward impact on the overall index.

Excluding the volatile energy prices, which were 5 percent lower in May than 12 months earlier, consumer prices rose 1.0 percent.

Excluding energy and unprocessed food -- or what the European Central Bank calls core inflation -- prices were up 0.9 percent, a nine-month high, accelerating from a revised 0.7 percent in April.

"It was a positive surprise, especially the core figure," said Teunis Brosens, economist at ING bank.

"It has been flat around 0.6-0.7 percent since September. Normally, I would not normally be interested in a 0.2-0.3 percentage point change in core inflation, but in the circumstances it's good news," he said.

The stronger than expected numbers came a day after data showed German consumer prices rising at their fastest in eight months in May.   Continued...

Jose Manuel Abel, 47, moves a pallet as he works at a fruit and vegetable warehouse in Munich October 10, 2013. REUTERS/Marcelo del Pozo