Eurozone return to inflation confirmed as food prices surge

[BRUSSELS] A modest uptick in eurozone inflation in July was confirmed by data on Friday which showed food prices surging over the year, although overall price indices still fell in 12 of the 19 member states.

Eurozone prices rose 0.2 per cent year-on-year, Eurostat said, confirming its initial estimate of two weeks ago . Month-on-month, prices fell 0.6 per cent from June.

The annual rate remains well short of the European Central Bank's target of just below 2 per cent. Until the annual figure posted a 0.1 per cent rise in June, prices had not risen in the 19 countries using the euro since January.

Core inflation, which excludes the most volatile components of unprocessed food and energy, was unchanged at 0.8 per cent in July. The narrower inflation indicator, which excludes energy, food, alcohol and tobacco products, rose an unchanged 0.9 per cent. Both were the same as initial estimates.

Energy prices fell heavily again in July, by 6.7 per cent after a 6.4 per cent annual drop in June and 8.1 per cent recorded in May. Month-on-month, they were 1.0 per cent lower.

Prices for services, the biggest component of the eurozone economy, rose 1.2 per cent year-on-year, but the biggest increase was in food, where unprocessed foodstuffs rose 2.9 percent year-on-year in July, nearly double the 1.5 per cent seen in June.

Prices of fruit were 6.4 per cent higher than in July last year and vegetables 5.6 per cent more expensive. A 1.6 per cent annual increase in prices set by restaurants and cafes was the biggest contributor to the overall eurozone inflation figure.

Nonetheless, smaller economies in the east continued to lead the dozen eurozone states which posted negative annual rates in July, notably Bulgaria and Croatia, where prices fell 1.1 per cent on the year, and Slovakia, where they were down 0.9 per cent. Belgium, with inflation of 2.0 per cent, and Sweden, with 1.1 per cent, led those economies where prices rose.

REUTERS