Eurozone deflation spell ends as prices remain flat

The eurozone's recent spell of deflation ended this month, with official data showing prices were flat in the year to April.

Eurostat, the European Commission's statistics bureau, reported no inflation in the 19-member region in the year from April 2014, up from minus 0.1 per cent in March. Inflation hit a low of minus 0.6 per cent in January following the sharp drop in energy prices.

The price of Brent Crude has risen over 20 per cent from April 1 to today, from $57.10 per barrel to $66.20, helping to lift consumer prices.

Core consumer inflation, which strips out more volatile prices such as those for food and energy goods, remained at a record low of 0.6 per cent.

Signs of an extended period of ultra-low inflation helped bolster the case for eurozone quantitative easing, with the European Central Bank unleashing a €1.1tn package of mostly government-bond purchases in late January.

While price pressures are rising, inflation remains well below the ECB's target of below but close to 2 per cent. The central bank's economists do not expect inflation to reach that target again until the end of 2017.

The ECB said in an economic bulletin published on Thursday that longer-term inflation expectations had started to recover after hitting low levels in January.

"The decline observed over the previous two years has come to a halt. These movements - with some differences - were also observed in the United States and the United Kingdom," the central bank said.

The ECB also acknowledged a fall in a measure of inflation which formed an important part of president Mario Draghi's case for QE may have been partly triggered by factors other than a lack of confidence in the central bank's ability to hit its target.

"Some of the difference in the behaviour of market-based and survey-based measures of inflation expectations may stem from inflation risk premia," the ECB said.

Mr Draghi flagged a plunge in the five-year on five-year inflation-linked swap rate, a measure of inflation expectations based on market prices, in August. His remarks raised expectations that the ECB would eventually resort to QE.

Separately, Eurostat reported eurozone unemployment remained at 11.3 per cent in March.

More than 18m workers in the region are without jobs. The lowest rate was recorded in the eurozone's largest and most populous economy, Germany, where unemployment was 4.7 per cent. In Greece, unemployment stood at 25.7 per cent in January.

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