MNI: Euro Area Headline HICP Slows in August, Core Down Too

--EMU August HICP +2.0% y/y (Flash 2.0% y/y) vs July +2.1% y/y

By Jamie Satchi

     LONDON (MNI) - Euro area inflation confirmed a fall-back in headline

inflation in August, with core inflation also recording a decline, a report

published by Eurostat showed Monday.

     As expected, euro area annual inflation decelerated by a tenth of a

percentage point to 2.0% in August, down 0.1pp from July, and in line with

analysts' expectations of no change from the flash estimate published on August

31. 

     On the month, prices rose by 0.2%. 

     The result means euro area inflation fell closer towards the European

Central Bank's target of "below, but close to, 2%", consistent with price

stability, though it continues to be held up by elevated energy prices.

     --CORE HICP DOWN TOO

     Stripping out erratics, core inflation also recorded a 0.1pp dip on the

July figures, falling to 1.0% (also unchanged from its flash estimate). Like

headline HICP, core prices rose 0.2% between July and August.    

     --FUEL EFFECT WANEs, STILL DRIVER

     Once again, the major source of upward pressure was provided by the energy

component of the inflation basket. 

     On an annual basis, energy prices grew by 9.2% in August, down slightly

from down from 9.5% in July. Previous MNI analysis had highlighted an

expectation among analysts for this effect to moderate over the remainder of

this year and going into next, but the August data suggest this has yet to gain

traction. 

     To the 2.0% annual rise in headline consumer prices in August, at 0.87pp,

the sector was responsible for almost half the rise.  

     On the month ,fuel prices were up 0.5% -- the biggest month move of any

component.  

     Elsewhere, services (0.59pp) and food, alcohol and tobacco (0.48pp)

contributed the remaining bulk of inflationary pressure, while inflation across

non-energy industrial goods continued to remain soft (up 0.4% y/y for a 0.09pp

contribution to the headline rate). 

     --COUNTRY BREAKDOWN 

     Breaking down the euro area rate, downside pressure was cemented in Germany

(down 0.2pp to 1.9%), Spain (down 0.1pp to 2.2%) and Italy (down 0.3pp to 1.6%),

with inflation in France was unchanged at 2.6%. 

     Across the wider European Union, price pressures also abated slightly,

falling by 0.1pp to 2.1%, level with the outturn recorded in June. On the month,

prices rose by 0.2%.  

--MNI London Bureau; +44 203-586-2226; email: jamie.satchithanantham@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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