Sept. 14 (Bloomberg) -- Euro-area inflation accelerated for the first time in 11 months in August as rising energy costs threatened to exacerbate the economic slump.
Consumer prices in the 17-nation currency bloc increased 2.6 percent from a year earlier, the European Union’s statistics office in Luxembourg said today, matching an initial estimate on Aug. 31. Core inflation, excluding energy costs, slowed to 1.5 percent from 1.7 percent. Employment was unchanged in the second quarter after a 0.3 percent drop in the previous three months, a separate report showed.
Crude-oil prices rose to the highest in four months today, touching $100 a barrel for the first time since May, and the surge in recent months has pushed up costs for consumers and companies. While the European Central Bank raised its inflation forecasts this month, ECB President Mario Draghi unveiled a plan to buy unlimited quantities of short-dated government bonds of nations receiving emergency bailouts to tame the debt turmoil.
“The underlying inflationary environment is far from alarming given extended weak economic activity, widespread low capacity utilization and generally muted wage growth amid high and rising euro-zone unemployment,” said Howard Archer, an economist at IHS Global Insight in London. The ECB “will be reassured to see that the increase was driven by a sharp move back up in energy prices and that core inflation actually moderated.”
The euro was higher against the dollar after the data, trading at $1.3035 at 11:33 a.m. in Brussels, up 0.3 percent on the day.
Consumer prices in the currency bloc rose 0.4 percent in August from the previous month, today’s report showed. The biggest upward impact on the annual inflation rate was from transport fuels, followed by heating oil and gas.
While oil prices have increased about 26 percent from their 2012 low on June 28, a deepening economic slump has left companies with less room to pass on higher costs. Euro-area producer-price inflation held at a 2 1/2-year low in July.
The ECB kept its benchmark interest rate at a record low of 0.75 percent on Sept. 6 as it forecast a deeper economic contraction for 2012 than it did three months earlier. Euro-area gross domestic product will drop 0.4 percent this year instead of 0.1 percent forecast previously, it said. At the same time, the ECB raised its projection for inflation next year to 1.9 percent from 1.6 percent. The central bank aims to keep inflation just below 2 percent.
Draghi, who called inflation risks “broadly balanced” in the medium term, said the ECB’s bond-buying plan would involve purchasing short-dated government debt on the secondary market of countries that ask Europe’s bailout fund to buy their debt on the primary market. Neither Spain nor Italy has made such a request.
Euro-area finance ministers are discussing aprogram for Spain at a meeting today in Nicosia, Cyprus. They will be joined by their colleagues from the 10 non-euro EU countries as well as the region’s central bankers this afternoon.
In the 27-nation EU, inflation accelerated to 2.7 percent in August from 2.5 percent in July. Consumer-price growth slowed in four member states, remained stable in two and quickened in 20, the statistics office said.
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