Eurozone edges out of deflation

Although energy prices continue to be the main drag on prices, following a further 5.8 percent in April, on the back of the continued low oil price, services and food were both up - services by 0.9 percent.

Although the rebound in prices is far from complete, the deflationary spiral appears to have ended ahead of expectations.

In the European Commission’s Winter Economic forecasts, published in February, Economics commissioner Pierre Moscovici predicted that prices would not start to increase until the second half of 2015.

A number of policy-makers had expressed fears that extremely low inflation in the eurozone could result in the kind of falling prices that have dogged Japan’s economy for two decades.

The news also serves as early vindication for the European Central Bank, whose €1.1 trillion bond-buying programme was intended, in part, to boost prices.

At the announcement of the programme in January, ECB president Mario Draghi said that it would remain in place “until we see a sustained adjustment in the path of inflation which is consistent with our aim of achieving inflation rates below, but close to, 2%”.

In its monthly economic bulletin published on Thursday, the ECB stated that inflation would remain low for several months before gradually increasing.

“The gradual increase should be supported by the favourable impact of the ECB’s monetary policy measures on aggregate demand, the impact of the lower euro exchange rate and the assumption embedded in futures markets of somewhat higher oil prices in the years ahead,” the bank stated.

Meanwhile, household income and spending per capita edged up by 0.1 percent in the fourth quarter of 2014.