The month-long decline in the inflation rate in the euro zone has been brought to a halt in March for the time being. Between February 2017 and February 2018, the annual rate was almost halved. Now a somewhat stronger rise in prices has been recorded again in March, with inflation climbing from +1.1 percent in February to +1.4 percent in March. The main reason for this increase is the so-called Easter effect as well as a distinct rise in food prices.
Prices for tourism-related services usually rise noticeably during Holy Week and Easter; if Easter falls on different months (March/April) in two consecutive years, stronger fluctuations can be noted in the annual inflation rate. This is referred to as the Easter effect which has now nudged prices up somewhat in March.
However, the core rate – i.e. prices excluding energy and unprocessed food – was hardly affected by this, rising only slightly from +1.2 percent to +1.3 percent. Particularly the price pressure on goods from the manufacturing sector declined noticeably in March, thereby offsetting the rise in service prices for the most part.
Another recent price driver of importance was the price of food and beverages. The annual price increase of these products has actually more than doubled compared with February. This was mainly attributable to noticeably higher prices for unprocessed food and an increase in the price of tobacco products.
The outlook for the coming months signals an initially more volatile momentum of price development, with the unwinding Easter price effect playing a key role in April. Compared with the previous year, service prices are expected to fall noticeably in this month. However, inflation can then be expected to gradually accelerate again as the year continues. Nevertheless, the inflation rate of „close to but below“ two percent targeted by the ECB will again not be reached this year. As annual average for 2018 for the euro zone we expect inflation to rise by +1.5 percent compared with the previous year.