Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Euro zone growth below expectations, core inflation slows

Published 01/31/2020, 06:45 AM
Updated 01/31/2020, 06:45 AM
Euro zone growth below expectations, core inflation slows

Euro zone growth below expectations, core inflation slows

By Jan Strupczewski

BRUSSELS (Reuters) - The euro zone economy grew less than expected in the last quarter of 2019, a first estimate showed on Friday, while core inflation slowed in January, a worrying sign for the European Central Bank.

Gross domestic product in the 19 countries sharing the euro rose 0.1% quarter-on-quarter for a 1.0% year-on-year gain, according to Eurostat, the European Union's statistics office. Economists polled by Reuters had expected a 0.2% quarterly and a 1.1% annual increase.

"The ECB will not like today's data. This is because it is counting on stronger economic growth to drive inflation up. In fact, the economy actually lost momentum in autumn," said Christoph Weil, an economist at Commerzbank (DE:CBKG).

The disappointing growth for the euro zone was mainly caused by GDP contractions in France and Italy, its second and third biggest economies.

The ECB targets inflation below but close to 2% over the medium term, but it has been struggling to hit that target for years, despite its program of government purchases to inject more cash into the economy.

Eurostat said consumer prices fell 1.0% month-on-month in January for a 1.4% year-on-year rise, accelerating from a 1.3% rate in December and 1.0% in November.

But the pick-up in headline price growth was mainly caused by a jump in the volatile prices of food, alcohol and tobacco, which rose 2.2% year-on-year. Energy prices were also up 1.8%.

Without unprocessed food and energy -- what the ECB calls core inflation -- prices grew 1.3% year-on-year, decelerating from 1.4% in December.

An even narrower inflation measure watched by many market economists also excludes alcohol and tobacco, which can move if excise taxes change. It decelerated even more, to 1.1% from 1.3% in December, year-on-year.

"Headline inflation ticked up, but core inflation fell to 1.1%," said Bert Colijn, senior euro zone economist at ING bank. "Core was always likely to come back down again as it had trended higher than price pressures warranted at 1.3% over the past two months."

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.