June: -0.1% m/m, +2.4% y/y (unrevised)
May: -0.1% m/m, +2.4% y/y
April: +0.5% m/m, +2.6% y/y
March: +1.3% m/m, +2.7% y/y
February: +0.5% m/m, +2.7% y/y
January: -0.8% m/m, +2.7% y/y
—

FRANKFURT (MNI) – Annual Eurozone inflation was confirmed at +2.4%
in June, as energy price inflation slowed to a 22-month low, while the
core rate remained stable, Eurostat reported on Monday.

Consumer prices declined 0.1% for the second month in a row, in
line with most analysts’ forecasts.

Energy prices fell 1.7% on the month, dampening the annual rise to
6.1%, the weakest since August 2010. Still, energy remained the main
driver of the annual rise, with its components adding a half a point to
the headline rate.

Modest global economic growth and demand are likely to limit oil
price gains in the coming months, the International Energy Agency said
in its latest Oil Market Report.

The Organization of the Petroleum Exporting Countries also pointed
last week to a “comfortable market situation” ahead, due to slowing oil
demand growth next year and projected increases in non-OPEC supply. “The
current high level of stocks in the OECD, combined with rising
inventories in the non-OECD, should also provide an additional cushion
to the market,” OPEC said.

However, prices could still remain high in absolute terms due to
ongoing supply-side risks and potential emerging market demand, the IEA
warned. “This arguably represents as much of a policy challenge as does
the perceived bogeyman of price volatility.”

Food, alcohol and tobacco were 0.3% more expensive on the month and
3.2% costlier on the year.

The core rate excluding energy, food, alcohol and tobacco edged up
0.1% on the month, leaving the annual rise steady at 1.6% for the fourth
month in a row.

Factoring out energy and unprocessed food prices – the European
Central Bank’s preferred measure of core inflation – the annual rate
stabilized +1.8%.

The composite PMI polls point to diminishing pipeline price
pressures, as input price inflation slowed to a two-and-a-half year low
(51.3) in June, while prices charged fell at the fastest rate (47.5)
since February 2010.

With demand anemic, companies’ pricing power should remain weak
over the coming months. A growing proportion of firms are revising down
selling price expectations, a European Commission poll showed. Receding
inflation fears may also explain the recent recovery in consumers’
willingness to make major purchases, seen in the same poll.

Noting current oil futures prices, European Central Bank President
Mario Draghi projected inflation in the Eurozone to slow further this
year and descend below 2% in 2013.

“Over the policy-relevant horizon, in an environment of modest
growth in the euro area and well-anchored long-term inflation
expectations, underlying price pressures should remain moderate,” Draghi
said.

Joint forecasts from French and Italian statistics offices and
Germany’s Ifo institute see inflation averaging +2.0% over the second
half of the year. “Given the persistent worsening of the labor market,
inflationary pressures should remain moderate,” the institutes said,
forecasting core inflation to ease slightly to +1.4% in 3Q.

— Frankfurt bureau: +49 69 720 142; e-mail: frankfurt@marketnews.com —

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