Eurozone dips back into deflation, as estimated

Data from Eurostat on Wednesday confirmed the Eurozone fell back into deflation in April.

Consumer prices fell 0.2% compared to a year ago, in line with the preliminary estimate and consensus, and down from 0.0% in March.

The main drag came from a drop in the rate of services inflation, with prices up 0.9% compared with 1.4% in March.

“Today’s results show that inflation in the eurozone is holding steady, but a contracting rather than expanding economy is surely not what Mario Draghi had in mind at this stage of his ECB presidency,” said Dennis de Jong, managing director at UFX.com.

“Draghi is running out of options to turn around a flagging EU, and he will know that in just five weeks’ time he could have to deal with the uncertainty that a British vote to leave the European Union would bring. Waiting until the result is known on 24 June seems to be the order of the day for investors and policymakers alike.”

Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said: “Overall, all indicators suggest that the Eurozone inflation will increase in the next six months, chiefly due to mean-reversion in energy prices. But we also think core inflation will edge higher to about 1.3% from its current 0.7%.”