MNI: Euro Area HICP Lower in April, Services Pulls Down Core

--EMU April HICP +1.2% y/y vs March +1.3% y/y

By Jamie Satchithanantham

     LONDON (MNI) - Euro area inflation surprised to the downside in April, with

core inflation falling by much more than market expectations, confirming a flash

report published earlier in the month, data released by Eurostat showed

Wednesday.

     Euro area annual inflation stood at 1.2% in April, down from 1.3% in March

and below the year-ago result of 1.9%.

     --LOWER SERVICES INFLATION OFFSETS FOOD, ENERGY

     Despite support from food, alcohol and tobacco (2.4% in April vs 2.1% in

March) and energy (2.6% April vs 2.0% March), Eurozone inflation was pulled

lower by weaker services inflation. Services prices were up an estimated 1.0%

y/y in April, down from 1.5% in March.

     Food, alcohol and tobacco contributed 0.47pp to the annual inflation rate,

energy 0.25pp while services was only responsible for 0.45pp (down from 0.67pp

in March).

     --POSSIBLE EASTER DRAG ON CORE

     Core inflation, which strips out the prices effects from food, alcohol,

tobacco and energy, also receded on the month, falling sharply to 0.7% y/y from

1.0% in March (also unchanged from its flash estimate).

     Ahead of the release, analysts were near unanimous in expecting lower core

services inflation to drag on the overall core measure, stemming from an Easter

effect.

     Easter Sunday fell earlier in the year in 2018 (April 1) versus last year

(April 16) and the subsequent base effect was likely responsible for the

majority of the core slide. The flash estimate does not, however, provide a

breakdown of the inflation figures beyond the broad categories.

--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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