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Deflation threat retreats as euro zone households see rising prices

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Confidence in the euro zone's economy stabilised in May after a strong start to the year, held back from further gains by pessimism among households, who also expect rising prices in a sign of the retreating threat of deflation.

[BRUSSELS] Confidence in the euro zone's economy stabilised in May after a strong start to the year, held back from further gains by pessimism among households, who also expect rising prices in a sign of the retreating threat of deflation.

The European Commission's monthly economic sentiment indicator was 103.8, stable versus a revised reading for April and slightly better than the 103.5 forecast by economists in a Reuters poll. Business morale fell by 0.05 points to 0.28.

Despite the steady sentiment, the surveys pointed to a broad recovery in the euro zone, as confidence in industry rose slightly, services showed solid gains and shop owners were more positive about current and future business.

Arguably most positive for the European Central Bank, which launched a money-printing programme this year, the European Commission said consumers' inflation expectations rose for a fourth straight month in May, jumping to 3.6 from 0.7 in April.

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