According to the data provided by the Eurostat, the Eurozone inflation rose 1.8% on a year-over-year basis in January 2017 as compared to a 1.1% rise in December 2016. This rise in inflation is improving confidence in the economy.
This month’s reading was the highest reading since February 2013. The higher inflation figure is easing concerns about the deflationary situation. In the past years, we also we saw that the deflationary situation was a major concern for the Eurozone economy. The falling consumer demand and consumer spending were hampering economic growth (VGK) (FEZ). However, the rise in inflation is also improving investor confidence.
The improved figure is mainly due to the improvement in food and fuel prices. Improvement in energy prices was an important contributor to Eurozone inflation. Excluding energy, food, and tobacco, the inflation figure was 0.9%.
Will it impact the central bank’s decision?
The ECB (European Central Bank) has taken various steps in the form of easing monetary policy and quantitative easing. The central bank also has a target inflation level of 2%. The January figure is close to the central bank’s 2% target level. All these steps were taken by the ECB mainly to promote economic growth and improve inflation in the economy (HEDJ) (EZU) (IEV).
In the next part of this series, we’ll analyze the performance of US flash services PMI in February 2017.