Drops in energy and food prices drive Eurozone CPI lower in February

The cost of living in the Eurozone fell in February by much more than had been expected as the retreat in energy prices deepened and inflation registered widespread weakness across the rest of the economy, preliminary data showed.

The Eurozone consumer price index slipped by 0.2% year-on-year (consensus: 0.0%), according to Eurostat, after advancing by 0.3% in January.

So-called 'core' CPI, which strips out the more volatile components such as unprocessed food, energy, alcohol and tobacco, retreated from a 1.0% year-on-year clip to 0.7% year-on-year.

Economists had expected a reading of 0.9%.

Prices for unprocessed food fell back from a 1.4% pace to 0.3%, while in energy they dropped by 8.0%, versus a 5.4% decline in the month before.

Inflation in non-energy industrial goods and services retreated to a 0.3% and 1.0% clip, after rising by 0.7% and 1.2% in January.

Falling readings on core inflation were consistent with a fading boost to inflation from a weaker euro, which meant the European Central bank was likely to continue using negative interest rates to keep strength in the currency in check, Pantheon Macroeconomics said.

A dip in services inflation, as a result of plunging prices for leisure and tourism, were likely the result of faulty adjustment for seasonal factors, the think-tank added.