Eurozone impaled by ‘inflation spike’

Eurozone inflation jumped again in March, fuelling concerns of an ‘inflation spiral’…

The European Union's Eurostat data agency said in a first estimate that 12-month inflation in the eurozone jumped to 3.5 percent in March, up from 3.3 percent in February and slightly above economists' forecasts for 3.4 percent. The figure, which came amid record oil prices of around 110 dollars a barrel, was far above the European Central Bank's comfort zone of just under 2.0 percent.

Jennifer McKeown, a consultant at Capital Economics, commented: "The latest eurozone data further deepens the ECB's dilemma between high and rising inflation on the one hand and slowing activity on the other.

'Not a good figure'

According to a survey from the European Commission, the record inflation came as confidence in the eurozone economy fell more than expected in March, hitting the lowest level in nearly two and a half years. Amelia Torres, Commission spokeswoman for economic matters added: "It’s not a good figure. We have to avoid second-round effects, that is to say an inflationary spiral.  Workers should keep their demands for wage increases in line with productivity gains in order to maintain the competitiveness of the eurozone”.

She added: “Despite the darker eurozone outlook, the commission believes that its separate business climate indicator for the bloc improved in March, rising to 0.80 points from 0.71 in February and halting a three-month decline. The relatively high level of the indicator points to sustained industrial production growth in the first quarter of this year”.