Eurozone Consumer Prices Drop in August

The European Union Statistics Office confirmed that consumer prices in Eurozone fell in August, driven by lower energy prices, but core inflation excluding those volatile elements also slowed sharply.

The office said that inflation in the 19-nation Eurozone fell 0.4% month over month in August and fell to -0.2% year on year, in line with the office’s earlier estimates and market expectations.

The decline in energy prices of 7.8% year-on-year in August had the biggest impact on the overall consumer price index, subtracting 0.77 percentage points from the final figure.

Industrial goods, other than energy, pushed the index down 0.03%, erasing the impact of a positive contribution of 0.33% from government food, beverages and tobacco and 0.30% from services.

With the exception of volatile food and energy prices, or what the European Central Bank calls core inflation, prices fell 0.5% on a monthly basis and recorded an increase of 0.6% on an annual basis, as economists polled by Reuters predicted their opinions. This represented a slowdown from 1.3% year-on-year growth in July.

A narrower measure of inflation that also excludes alcohol and tobacco prices fell 0.6% month-on-month and a 0.4% year-on-year increase, slowing from 1.2% growth in July.

The European Central Bank wants to keep inflation below 2% but close to that level in the medium term and is monitoring the core inflation benchmark closely to make its policy decisions.