Euro-Area Consumer Prices Rise More Than Estimated on Food

Photographer: Xabier Mikel Laburu/Bloomberg News

The European Central Bank last month lowered its 2013 inflation forecast to 1.6 percent from 1.9 percent and projected prices will increase 1.4 percent next year. Close

The European Central Bank last month lowered its 2013 inflation forecast to 1.6 percent... Read More

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Photographer: Xabier Mikel Laburu/Bloomberg News

The European Central Bank last month lowered its 2013 inflation forecast to 1.6 percent from 1.9 percent and projected prices will increase 1.4 percent next year.

Euro-area consumer prices increased more than economists estimated in December as higher prices for food and services offset slower growth in energy costs.

The inflation rate remained at 2.2 percent, the European Union’s statistics office in Luxembourg said today. The median forecast of 34 economists in a Bloomberg News survey was for a decline to 2.1 percent.

The European Central Bank last month lowered its 2013 inflation forecast to 1.6 percent from 1.9 percent and projected prices will increase 1.4 percent next year. The ECB will maintain its benchmark interest rate at 0.75 percent next week, economists forecast in a separate Bloomberg survey.

The euro-area economy has shrunk for two successive quarters and economists foresee a further decline in gross domestic product in the final three months of last year. The ECB estimates contractions of 0.5 percent and 0.3 percent in 2012 and 2013. The ECB yesterday said November lending to households and companies slowed for a seventh month.

The euro was little changed after the data were released, trading at $1.3011 at 11:03 a.m. in Brussels, down 0.3 percent.

Energy prices increased 5.2 percent in December after a 5.7 percent gain a month earlier, today’s report showed. Prices of food, alcohol and tobacco rose 3.1 percent, compared with 3 percent growth in November, while the cost of services rose 1.8 percent after a 1.6 percent increase a month earlier.

‘Massive Social Unrest’

Job cuts across Europe are adding to pressure on consumer spending as governments raise taxes and cut social benefits. Spain’s biggest bank, BFA-Bankia (BKIA), plans to shed about 6,000 jobs, or more than a quarter of its workforce, in return for European loans to recapitalize the country’s banking sector.

Still, with the ECB committed to do whatever it takes to save the euro, including unlimited purchases of government bonds, only “massive social unrest” could drive southern countries to abandon the bloc, Nick Beecroft, chairman of Saxo Capital Markets U.K. Ltd., said yesterday on Bloomberg Television.

“A democratic protest and democratic change, and those countries saying: ‘We just can’t take this austerity. If that’s the price to stay, then we’re going to leave,’” Beecroft said.

To contact the reporter on this story: Angeline Benoit in Madrid at abenoit4@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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