ECB CPI shows la dolce vita is getting more expensive

17th March 2015 By: Ranko Berich

ECB CPI – 17/03/15

Mario Draghi has taken an optimistic tone of late, and the latest eurozone data supports his conclusion that things are beginning to look up.

Headline inflation fell 0.3 per cent year-on-year and this is an improvement from the rather worrying 0.6 per cent fall we saw in January. However, it is important to remember that these declines were driven largely by falling fuel prices, which are not actually a bad thing for the eurozone’s economy.

A closer look at the data shows that the cost of la dolce vita is actually increasing across the eurozone, with restaurants, cafes, tobacco and rent prices leading the rise. Once food, fuel and other volatile items are excluded, core inflation was a much healthier 0.7 per cent year-on-year.

It’s important to remember this data doesn’t even include most of the effects of the ECB’s QE programme, which only started this month. The euro nosedived in March and this will definitely begin to show through in the next batch of figures, boosting the improvement in inflation that today’s data has shown.