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Eurozone posts promising figures on inflation and retail sales

By Hugh Wilson

Price rises edge closer to European Central Bank target easing pressure for rates cut

The 19-country eurozone ended a largely gloomy 2019 on a promising note, after figures showed rising inflation and retail sales.

A flash estimate from statistics agency Eurostat showed inflation hitting a six-month high in December to climb nearer to its official target.

The agency estimates that annual inflation climbed to 1.3 per cent from 1 per cent the previous month, with the highest price rises in Slovakia, the Netherlands, Lithuania and Latvia.

The food, alcohol and tobacco category was expected to enjoy the highest price rises. Energy lagged behind at only 0.2 per cent.

Though the 1.3 per cent inflation rate is still below the European Central Bank (ECB) target for close to 2 per cent, it is higher than at any time since June 2019. The rise is likely to ease pressure on the ECB to cut interest rates in the short term.

Bert Colijn, senior economist at ING, said: “Depending on oil price developments – which are likely to be volatile as Middle East tensions have spiked recently – it is expected that inflation could trend somewhat higher than the 1 per cent range for the coming months.”

The eurozone was given a further boost by separate Eurostat figures showing that retail sales rose by a better-than-expected 1 per cent in November compared with the previous month. Non-food products drove the increase, with sales jumping 3.1 per cent compared with November 2018.

FURTHER READING: ECB’s Lagarde keeps stimulus measures in place

FURTHER READING: ECB urged to act together on inflation

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