Christmas Turkeys, Holidays Push Up Euro Zone Prices
Europeans' appetite for turkeys and Christmas getaways pushed up the cost of living in the euro zone in December, but the European Central Bank expects the rate of inflation to cool this year and offer some relief to households during the recession.
Annual consumer inflation in the 17 countries sharing the euro was 2.2 percent in December, the same level as in November, the EU's statistics office Eurostat said on Wednesday, confirming its initial reading released earlier this month.
Busy shopping for the Christmas turkey or ham and gifts and spending on holidays allowed retailers and service providers to pass on some price rises to consumers, at a time when record unemployment is limiting their ability to do so.
Spending on food pushed up inflation on a monthly basis by 0.4 percent in December from November. The cost of package holidays, hotels and air transport also drove up the rate of inflation compared to November.
Despite three years of a public debt crisis in Europe, high energy prices kept euro zone inflation stubbornly high.
Still, inflation is moving closer to the ECB's target of below, but close to, 2 percent after peaking at 3 percent in late 2011.
That is welcome news for the euro zone's 330 million citizens, and could go some way to helping consumers spend again to help an expected recovery towards the end of 2013. The euro zone's economy slipped into its second recession since 2009 last year and is expected to barely grow at all in 2013.
The cost of energy fell 0.5 percent in December from November, while heating oil and fuels for transport helped cut the rate of inflation on a monthly basis.
"Euro area inflation is clearly trending down as energy price inflation recedes," said Raphael Brun-Aguerre, an economist at JP Morgan.
"Further declines in energy price inflation are expected in the coming months, which should drag headline inflation below 2 percent sometime in the first quarter of 2013," he said.
ECB President Mario Draghi said at the bank's last meeting on Jan. 10 that "inflationary pressures should remain contained" and kept interest rates at 0.75 percent.
World oil prices, driven by tension between the West and Iran over Tehran's nuclear programme, drove the cost of living for much of 2012, but Brent crude has slipped from an August high of $120 a barrel to around $111 on Wednesday.