World Economy

Euro zone deflation ends; prices flat in April

The euro zone ended four months of deflation in April, with official data on Thursday showing that prices were unchanged from a year ago.

Angel Navarrete | Bloomberg | Getty Images

The euro zone's inflation rate was flat in April from the year before, in line with market expectations, following a 0.1 percent fall in March, the European Union's statistics offices said in an estimate.

Signs that deflation risks in the 19-member euro zone are abating come against a backdrop of massive monetary stimulus from the European Central Bank to boost economic growth and ease worries about falling prices.

"Our view has been that economic activity would pick up this year and with the impact of QE (quantitative easing), deflationary expectations would moderate," Goldman Sachs Chief Global Equities Strategist, Peter Oppenheimer, told CNBC following the release of the inflation data.

"And the combination of bond yields at incredibly low levels, with some improvement in growth and a pick-up in earnings, is pretty positive for equities."

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Core inflation in the euro area, which strips out volatile energy and food costs, was unchanged at 0.6 percent from a year earlier, Eurostat said.

Unemployment falls

Other data released by the statistics agency Thursday showed that euro zone unemployment fell in March by 36,000 to 18.1 million. The fall, however, was not large enough to shift the unemployment rate. It stood at 11.3 percent last month, unchanged from February.

"The latest euro-zone inflation and labour market data paint a mixed picture, with deflation ending - for now at least - but unemployment stuck at a very high level," Jonathan Loynes, chief European economist at Capital Economics, said in a note.

"The general picture remains one of very weak underlying price pressures in the euro-zone, reflecting both the weakness of pipeline cost pressures and the spare capacity left in the economy."

Loynes said that deflation could return to the euro zone if oil and commodity prices fall again. Brent crude oil prices have recovered some ground after falling about 40 percent since last June – contributing to an overall fall in prices not just in the euro zone but across the world.