Euro area’s headline inflation seems to have climbed further in August

Euro area’s headline inflation is expected to have climbed further in August. According to a Societe Generale research note, the currency bloc’s headline inflation is likely to have come in at 0.4 percent year-on-year, the highest reading since October 2014.

Despite a likely drop in energy prices in sequential terms, the energy component is expected to have rebounded and registered a minor fall in annual terms in August. Meanwhile, overall food prices are expected to have stabilized in August, after having improved sharply in July with the help of higher unprocessed food prices.

Moreover, core inflation is also expected to have remained stable in August. It is likely to have come in at 0.9 percent year-on-year, thanks to stable services inflation along with slightly subdued non-energy industrial goods prices, stated Societe Generale.

Inflation in the euro area is expected to recover markedly in the future and is anticipated to accelerate over 1 percent by the end of 2016, with the help of base effects from energy prices.

“Overall headline inflation is expected to average 0.4 percent in 2016 and 1.5 percent in 2017, while the core metric should average 1.0 percent in 2016 and improve only marginally to 1.1 percent in 2017”, added Societe Generale.