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First drop in core inflation in decades
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The year-on-year inflation rate rises one tenth of a percentage point in April to 1.5%.
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Inflation continued to rise slightly in April, reflecting the trends in oil prices and the euro. Consequently, the year-on-year rate of change for the consumer price index (CPI) stood at 1.5% at the end of the first four months, one tenth of a percentage point more than the previous month and 1.7 points more than twelve months earlier, when the economy was in recession.
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In effect, the main group behind this rise in inflation in April was fuels and oils, up 21.3% in the last twelve months, almost 4 percentage points more than in the previous month. In April, the greatest push upwards actually came from the quarterly revision of gas prices.
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The other volatile component of the CPI, fresh foods, also helped to boost inflation, although to a much smaller extent, going from an annual rate of change of -2.2% in March to -1.3% in April. The biggest contribution to this increase came from potatoes and chicken, although their year-on-year rates of change were still negative.
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Core inflation stands at -0.1%, its first negative figure for many decades.
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Although the CPI's movement in April was in line with what had been expected, the main surprise was provided by underlying inflation, the most stable core of inflation that excludes unprocessed foods and energy products, which fell 0.3 percentage points and stood at -0.1%. This was the first time it had seen negative figures in the last few decades. It should be noted that this drop has been influenced by a calendar effect, as Easter was earlier this year compared with 2009. However, the low level of core inflation also reveals the listlessness of consumption.
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Processed foods slowed down one tenth of a percentage point, recording a year-on-year increase of 0.5%. This drop can mostly be explained by the fall in milk prices, down 8.7% year-on-year.
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The slowdown was greater in services, whose annual rate of change fell half a point to 0.8%, its lowest for several decades. The main downward pressure came from package holidays, whose prices fell slightly compared with an increase in April 2009. Other services, such as telephony, also contributed to the slowdown.
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Inflation differential with the euro area remains slightly positive.
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The harmonized consumer price index with the European Union saw a year-on-year increase of 1.6% in April, 0.1 percentage points more than the previous month. Consequently, the inflation differential with the euro area remained slightly positive. However, the differential for core inflation was negative, by more than half a point.
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Inflation is likely to be moderate over the coming months.
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With regard to trends in inflation over the coming months, a slight increase is likely in May, whereas the effect of the higher value added tax will be noted in the second half of the year. However, weak consumption and strong competition in international markets will tend to contain prices, so that year-end inflation will be close to the upper limit for the euro area as a whole, namely 2%.
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Wholesale prices reflect the rise in commodities
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The depreciation of the euro contributes to the higher rise in import prices.
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In March, wholesale prices continued their upswing of the last few months, which in turn reflects the rising trend in most commodities in the last year. Consequently, the general index for industrial prices rose 2.4% in the last twelve months, almost 5 percentage points more than in March 2009. Most of the components recorded rises, particularly energy goods. However, consumer goods posted a slightly negative year-on-year rate of change and capital goods held their prices at the same level as last year.
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Even higher was the 7.2% year-on-year rise in import prices, affected by the depreciation of the euro over the last year. For their part, the prices of farmers' output in January continued to post an annual drop of 5.5%, as the higher decrease in animal products was offset by a smaller reduction in agricultural prices.
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