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Euro Area: Harmonized inflation drops to lowest level since September 2024 in May
Latest reading: Harmonized inflation fell to 1.9% in May, slightly below April’s 2.2% and the ECB’s 2.0% target. May’s result represented the lowest inflation rate since September 2024. Looking at the details of the release, prices for services rose at the slowest pace in three years. That said, prices for food, alcohol and tobacco rose at a sharper rate in May.
In addition, the trend pointed down mildly, with annual average harmonized inflation coming in at 2.2% in May (April: 2.3%). Meanwhile, core inflation fell to 2.3% in May from the previous month’s 2.7%.
Finally, harmonized consumer prices dropped 0.03% in May over the previous month, contrasting the 0.57% increase recorded in April. May’s result marked the sharpest fall in prices since January.
Outlook: Our Consensus is for inflation to remain around current levels, broadly matching the ECB’s 2.0% target amid downbeat oil prices and soft economic activity.
Panelist insight: ING’s Bert Colijn commented:
“Recent trade war developments have so far had a downward impact on inflation in the eurozone. Global commodity prices have fallen, the euro has strengthened against the dollar, uncertainty has muted economic activity in the eurozone, and the European Commission has so far refrained from introducing retaliatory tariffs on the US, which would result in higher prices.”
