Euro-Area Inflation Slows on Telecommunications Costs

The euro-area inflation rate fell for a second month in February, led by price declines in the telecommunications industry.

Annual consumer-price growth slowed to 1.8 percent from 2 percent in January, in line with an initial estimate on March 1, the European Union’s statistics office in Luxembourg said today. In the month, prices rose 0.4 percent. The annual core inflation rate, excluding volatile costs such as energy, alcohol and tobacco, held at 1.3 percent.

The European Central Bank last week maintained its benchmark interest rate at 0.75 percent as President Mario Draghi described the inflation outlook as “broadly balanced.” The ECB forecasts that euro-area consumer prices will increase 1.6 percent this year, below its 2 percent ceiling, as gross domestic product declines 0.5 percent.

“Inflation isn’t a severe risk to the economic situation, neither in Germany nor in the euro zone as a whole,” Jens Kramer, an economist at NordLB in Hanover, Germany, said before the data were released. “It is very comfortable for the ECB to see inflation rates come down for their argument to stick to very low interest rates.”

The euro was higher against the U.S. dollar after the data, trading at $1.3061 at 11:11 a.m. in Brussels, up 0.4 percent on the day.

The cost of food, alcohol and tobacco rose an annual 2.7 percent in February after a 3.2 percent annual gain in January, according to today’s release. Telecommunications costs declined 5.2 percent.

Labor Costs

Energy cost growth was steady at 3.9 percent, while the cost of services increased 1.5 percent, the data showed.

Nominal hourly labor costs in the euro area rose 1.3 percent in the fourth quarter from the year-earlier period, down from growth of 1.8 percent in the third quarter, a separate report showed today.

Euro-area industrial output dropped 0.4 percent in January from the month before, adding to signs that the region’s recession extended into the first quarter. GDP in the final quarter of last year declined 0.6 percent, the most in almost four years.

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