Euro-Zone Inflation Confirm at 0.6%, Industrial Production Drops by the Most on Record

Euro-Zone March HICP inflation was confirmed at 0.6% y/y, in line with the preliminary number and down from 1.2% y/y in February. Prices rose 0.4% m/m. The sharp decline in the annual rate was once again largely due to positive base effects from lower energy prices, with heating oil prices down 34.8% y/y and fuels for transport down 19.0% y/y. However, other prices are also coming down and core inflation, excluding the most volatile items, decelerated to 1.5% y/y from 1.7% y/y in the previous month. This is far below the ECB's 2% upper limit for price stability and will add to arguments for further rate cuts from the ECB with at least some council members starting to get concerned about the risk of deflation.

Euro-Zone February industrial production dropped 2.3% m/m and 18.4% y/y, after -2.4% m/m and -16.0% y/y in the previous month. Production was down 7.6% in the three months to February, which highlights the pace of the contraction. With production down nearly 20% over the year the Euro-Zone is poised for a marked rise in jobless figures if there is no quick turnaround in demand, which judging by orders data is not in sight. Data confirm that Q1 GDP data will look bleak and could even be worse than Q4 numbers.