Eurozone inflation weaker than expected in August, could prompt ECB action

Inflation in the eurozone came in lower than expected for August, according to a flash estimate by Eurostat, which could prompt the European Central Bank into action.

Inflation was stable compared with July at 0.2%, which was below economists’ expectations of 0.3%, as prices of food, industrial goods and services rose less than the previous month.

Core inflation – which strips out energy – was down to 0.8% from 0.9%, below estimates for it to remain unchanged.

Stephen Brown, European economist at Capital Economics, said: “The unchanged headline inflation rate in August highlights the fact that price pressures in the euro-zone remain weak and boosts the case for more monetary easing from the ECB."

“Unless energy prices drop back sharply, headline HICP inflation will rise over the coming months. But core price pressures are likely to remain weak. Indeed, other data released this morning revealed that there is still a large amount of spare capacity in the labour market, with the eurozone unemployment rate unchanged at 10.1% in July. That was weaker than the consensus expectation of a drop to 10.0%.”