Europe Inflation Quickens to Fastest in Almost a Year

Euro Area inflation accelerated in January to the fastest in almost a year led by surging energy costs., Bloomberg 2/26/2010 9:56:45 AM

Consumer prices in the 16-nation euro region rose 1 percent from a year earlier after increasing 0.9 percent in December, the European Union statistics office in Luxembourg said. That’s the fastest inflation since February 2009 and in line with an initial estimate published on Jan. 29. In the month, January prices declined 0.8 percent.

European companies may find it hard to pass on rising energy costs to consumers after growth in the euro-area economy came to a near-halt in the fourth quarter and unemployment rose to the highest in more than 11 years in December. The European Central Bank on Feb. 4 kept borrowing costs at a record low and forecast price pressures to remain subdued” over the coming months.

Energy prices rose 4 percent in January from a year earlier, while alcohol and tobacco was 4.6 percent more expensive, today’s release showed. The euro region’s core inflation rate, which excludes volatile energy and food costs, was at 0.9 percent, down from 1.1 percent in December.

The European Commission yesterday forecast euro-area inflation to average 0.8 percent in the current quarter before accelerating to 1.3 percent in the three months through June. In 2010, inflation may average 1.1 percent, the Brussels-based commission forecast. The Frankfurt-based ECB aims to keep annual gains in consumer prices just below 2 percent.

The statistics office also said it is publishing for the first time data on administered prices, or costs set or influenced by governments.  An estimate for overall February inflation is scheduled to be released on March 2.

Europe Inflation Quickens to Fastest in Almost a Year