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Euro zone GDP falls short of expectations, inflation picks up

Euro zone economic growth was slower than expected in the last three months of 2019, a first estimate showed today. 

Meanwhile, inflation in January picked up in line with expectations thanks to a jump in prices of food, alcohol and tobacco and energy. 

The European Union’s statistics office Eurostat said gross domestic product in the 19 countries sharing the euro rose 0.1% quarter-on-quarter for a 1% year-on-year gain. 

Economists polled by Reuters had expected a 0.2% quarterly and a 1.1% annual increase. 

Separately, Eurostat said consumer prices fell 1.0% month-on-month in January for a 1.4% year-on-year rise, accelerating from a 1.3% rate in December and 1.0% in November. 

However, the pick-up in headline price growth was mainly due to a jump in the volatile prices of food, alcohol and tobacco which rose 2.2% year-on-year. Energy prices were also up 1.8%. 

Without unprocessed food and energy, what the European Central Bank calls core inflation, prices grew 1.3% year-on-year, decelerating from 1.4% in December. 

An even narrower inflation measure watched by many market economists also excluding alcohol and tobacco prices which can move due to excise tax changes, decelerated even more to 1.1% from 1.3% in December in year-on-year terms. 

The ECB wants to keep inflation below but close to 2% over the medium term.

But it has been struggling for years to spur faster price growth despite its programme of government bond buying on the market to inject more cash into the economy.

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