Inflation is back in the eurozone | Business| Economy and finance news from a German perspective | DW | 02.06.2015
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Business

Inflation is back in the eurozone

In May, eurozone inflation hit positive territory for the first time in six months, moving the currency bloc away from the risk of deflation. But the figure still falls way short of the European Central Bank's target.

Prices were up by a slightly better than expected 0.3 percent in May, compared with the same time last year, official figures showed on Tuesday. April's reading had been flat.

"This increase was stronger than widely expected, even if inflation is hardly racing ahead," said Howard Archer, chief European Economist at IHS Global Insight, told the AFP new agency.

The figures mark a return to inflation after five months of negative consumer prices, which had sparked fears about a prolonged bout of deflation in the single currency bloc. The numbers came a day after data showed that German consumer prices rose at their fastest pace in eight months in May.

Towards the end of last year, plunging energy prices as well as the eurozone's overall stagnant economy and high unemployment had caused prices to drop.

Economists fear deflation because it means shoppers tend to put off purchases in the belief they may become even cheaper, leading to ever weaker demand, slowing the economy and pushing up unemployment.

May's uptick can be attributed to a buoyant service sector, higher prices for unprocessed food and a rise in crude prices. The reading is, however, still far below the European Central Bank's target of 2 percent.

ng/uhe (AFP, Reuters, AP)

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