Eurozone inflation rises as energy costs jump

Inflation in the eurozone rose to 1.6% as expected in April as energy prices rose, official figures showed.

The increase in the annual inflation rate from 1.3% in March was in line with the consensus forecast and was unchanged from a preliminary reading issued by Eurostat. A year earlier the rate was 0.7%.

The cost of energy increased at an annual rate of 10.3% in April, up from 4.3% in March. Food, alcohol and tobacco inflation eased to 0.7% from 1.1% and services inflation in the zone's core dipped to 0.9% from 1.3%

The biggest increases were in Hungary, where prices rose 5.2%, and Poland with a rate of 5.1%. Prices fell 1.1% in Greece and 0.1% in Portugal. Inflation was 2.1% in Germany and 2% in Spain and 1.6% in France.

Markets are alert to the prospect of rising inflation as economies rebound from Covid-19 closures, which make comparisons difficult.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: "The April jump in core inflation in the U.S. suggests that we should be alert for a sharp rise in some components as the economy tries to get back to normal. Prices in Spanish hotels and restaurants, for example, are key to watch given that these firms lowered prices over the summer last year to attract customers.

"In the eurozone as a whole, however, the timing of summer sales in Italy and France and base effects from last year’s VAT cut in Germany will make it difficult to isolate any reopening bump to core prices in the next few months."