BRUSSELS (Reuters) – Euro zone consumer prices fell in August, against market expectations of a small increase, pulled down by a sharp drop in energy prices, the European Union’s statistics office Eurostat said in a flash estimate
Eurostat said consumer prices in the 19 countries sharing the euro fell 0.4% month-on-month for a 0.2 year-on-year decline. Economists polled by Reuters had expected a 0.2% year-on-year rise in August. The last time prices fell year-on-year in the euro zone was in May 2016 when they dropped by 0.1%.
Energy prices tumbled 7.8% year-on-year in August after a 8.4% fall in July. Prices of non-industrial goods also declined, by 0.1% after a 1.6% increase in July.
Without the volatile energy and also often changing unprocessed food prices – what the European Central Bank calls core inflation – prices fell 0.4% month-on-month for a 0.6% annual rise. Economists polled by Reuters had expected a much higher 1.1% year-on-year gain.
An even narrower measure excluding also alcohol and tobacco prices that market economists watch closely fell 0.5% month-on-month for a 0.4% year-on-year increase, barely half of what analysts had expected.
The ECB wants to keep inflation below, but close to 2% over the medium term.
Separately, euro unemployment was slightly lower than expected at 7.9% in July, up from 7.7% in June. Economists polled by Reuters had expected an increase to 8.0% of the workforce.
(Reporting by Jan Strupczewski; editing by Philip Blenkinsop)
