BRUSSELS | Wed Apr 29, 2011 10: 02 am EDT
Brussels (Reuters)-the Euro-zone inflation rose further above the objective of the European Central Bank in April, increases the chances that interest rates will rise in June, despite the weakening economic climate and domestic demand.
Inflation in 17 countries using the euro rose to 2.8 percent on-year this month of 2.7 percent a month ago, the highest level since October 2010, when it was 3.2 percent.
Consensus expectations were flat compared with March before meeting read next Thursday the European Central Bank interest rates. Analysts said the numbers increased prospects for a rate hike in June.
"Although we expect an increase in rates in the July meeting, the balance of risks is tilted toward the previous step," said Chief Economist of the ABN AMRO Aline Schuiling.
The ECB raised its main interest rate from a record 1.0 percentage points to 1.25% in April, the impact on consumer prices, the rising cost of energy and food.
"From the other party no surprise given our forecast may be stronger than the expected impact of the late Easter, which means that core inflation was probably a little stronger than we thought," said economist Marco Valli, Unicredit.
"We see that inflation hovering around current levels for some time, further acceleration to 3 percent, probably at the end of the summer."
The other data this month, however, the proposed growth in Germany and in the euro area and the figures from Spain, the biggest economy in the threat to Europe's debt crisis, unemployment and retail sales.
The monthly European Commission showed economic sentiment in the euro area as a whole fell for the second month in a row on 106,2 in April from 107.3 in March and below market expectations of a decline to 107.0.
"The combination of high oil prices, strong euro, and fiscal and monetary tightening began to dent economic mood in the euro area," said Martin van Vliet, an economist of ING.
The decline in mood through all sectors of the economy, with the exception of the construction, consumer optimism of most-11.6-10.6 in March.
NO LOANS BOOST
The ECB data also showed that the annual growth rate of loans to the private sector in the area of the single currency in March, slowed down, this defies expectations on the rise, but the growth of the money stock M3 stepped up.
Belgium, a roadmap for the euro-zone economy, reported the zone more quickly than expected first quarter economic growth of 1% for the quarter, against an average of 0.6 percent expected by economists polled by Reuters.
"Monetary data continue to point to modest recovery of growth in the euro area money and loans," said Christoph Balz, an economist of Commerzbank.
"While the data in itself does not indicate the upside risks to price stability, which require further monetary tightening, are further evidence that the economic situation is substantially changed from the year 2009 – therefore, the ECB considers that the extremely low interest rates are no longer appropriate.
GDP data for the whole euro area is 13. may.
Retail sales data to see more evidence of a weakening of domestic demand.
Sales in Germany fell in March, defying expectations rise as consumers bought less food and textiles in the month, when inflation exceeded the 2% limit.
Adjusted for consumer price increases, sales decreased by 2.1 percent month on month and by 3.5 percent on the year.
In the "periphery" of the euro-zone countries seeks to regain the confidence of the market in their public finances with tough austerity measures was a more pronounced decline in consumer demand.
In Spain, sales declined 8.6 percent on year in March and in Greece, the decline was 10.6% in February.
Consumer inflation expectations in the Euro zone, which is growing rapidly from November 2010, sharp struggled slightly lower from 30.8. Selling price expectations between the producers, on the rise since the August 2010 still noticeably decreased to 21.5 24 from 4.
The European Commission's business climate indicator, which refers to the phase of the economic cycle, also fell in the second month in a row, 1.28 points from 1 43 in March.
"Despite the current level of indicators remains close to the historic peaks, which indicates that the recovery in the industry will continue in the coming months," said the Commission.
Eurostat data also showed that unemployment in the euro area shall be held steady at 9.9 percent of the workforce in March.
(Other reporting offices in Brussels, Madrid, Berlin, Frankfurt and Athens; editing Rex Merrifield and Patrick Graham)
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