More expensive fuel drove euro zone consumer prices higher in December as expected but core inflation remained flat, indicating that any headline price rises will be subdued over the coming months.
The European Union's statistics office today confirmed its earlier estimate that consumer prices in the 16 countries using the euro rose 0.9 per cent year-on-year in December after a 0.5 per cent gain in November.
Fuels for transport were responsible for almost half of that annual rise, Eurostat said. Crude oil prices in December 2008 were roughly half the $70-77 per barrel range last month.
Consumer prices rose 0.3 per cent month-on-month, Eurostat said, and here fuel prices had a downward impact, along with cheaper clothes, lower rents and less expensive phone calls.
Without volatile energy and unprocessed food costs, in what the European Central Bank calls core inflation, prices rose 0.4 per cent month-on-month for a 1.0 per cent year-on-year gain, unchanged from November and October.
A broader core inflation measure, which excludes energy, food, alcohol and tobacco prices, was 0.5 percent on the month and 1.1 per cent annually, up from 1.0 per cent in November.
Economists have said large excess capacity in the economy and weak demand were likely to push down core inflation.
Further downward pressure on core inflation, which the European Central Bank watches keenly in policy decisions, would come from growing unemployment, which will limit wage growth.
The ECB aims to keep headline inflation just below 2 per cent over the medium term. The ECB left its main interest rate unchanged at a record low of 1 per cent yesterday, as expected.
Separately, Eurostat said the euro zone recorded a €4.8 billion trade surplus in November.
Exports fell only 6 per cent year-on-year while imports dropped 15 per cent, pointing to a pick-up in external demand for euro zone goods.
The unadjusted November surplus compares with a revised €6.6 billion surplus in October, and a €7 billion deficit in November 2008.
Adjusted for seasonal swings, the euro zone surplus in November was €3.9 billion, down from €4.7 billion in October.
Exports fell 0.4 per cent month-on-month while imports rose 0.3 per cent, which could signal healthier internal demand.
Reuters