Deflation in Eurozone Continues

Weak energy prices, which caused consumer prices in the eurozone to shrink 0.2% in April, produced 0.1% of contraction in May, Eurostat estimates.

Core inflation—which ignores volatile energy, food, tobacco and alcohol— rose to 0.8% in May from 0.7% in April, according to the EU’s statistics agency. But that is still well below the European Central Bank’s target rate of 2%. Inflation in the eurozone hasn’t been that high since February 2013.

Inflation in the region has dipped into negative territory several times over the past 18 months, mainly because of the sharp drop in oil prices. Eurostat notes that energy prices this month contracted by 8.1% year on year, compared with an 8.7% decline in April.

Economists say the ECB may not deploy additional stimulus measures this week because oil prices are on the rise. Last week oil futures briefly surpassed $50 per barrel for the first time this year. But analysts note the central bank also is closely monitoring unemployment data for the region.

April’s seasonally adjusted jobless rate for the eurozone was unchanged from March to April at 10.2%—the lowest since April 2009. Eurostat say 16.4 million people remain unemployed in the region.