Today’s flash estimate for consumer price development in August has recorded an inflation rate of 2.0 percent for the euro zone. It has turned out -0.1 points lower than in the previous month. Prices for energy in the consumers‘ shopping basket have risen again strongly, albeit not quite as strongly as in July. The rise in food prices was also somewhat more moderate at a high level whereas the increase in prices for industrial goods and services was weaker. The inflation rate has now been close to the ECB’s inflation target of „below but close to two percent“ for four months. Does this mean that the target has been reached? No, it doesn’t!
Despite the stable economic situation, domestic inflationary pressure in EMU remains subdued. This can be seen in the core rate which excludes the more volatile price components of unprocessed food and energy goods. In August this rate fell from 1.3 to 1.2 percent. To reach the inflation target, the core rate would have to rise more strongly and the overall inflation rate remain close to 2 percent over a longer period.
At the country level, consumer price inflation has mostly declined as was the case in Germany, Spain and Italy. A number of special factors also play a role here, such as the abolition of nursery school fees in Germany. Only in France did the inflation rate remain at the high level of the previous month at 2.6 percent. Here, the rise in energy prices was additionally fuelled by a moderate increase in the mineral oil tax in the spring.
The data published today is commensurate with our forecast scenario. The price development of other goods and services, which is mainly influenced by domestic economic effects, remains moderate. Energy prices and, to some extent, food prices remain the cause of the greatest fluctuations. The oil price, the key factor influencing prices of energy goods in the consumers‘ shopping basket, is likely to remain at the higher level beyond the USD 70 mark for some time to come. Food prices can also be expected to rise somewhat due to crop failures as a consequence of the prolonged heatwave. Following lower price increases at the beginning of the year, we expect inflation in the euro zone to lie at an annual average of 1.8 percent for 2018.