Euro inflation likely to increase to -0.2% y/y in Feb: Danske Bank

Quotes from Danske Bank:

- HICP inflation in Germany, Italy and Spain all surprised on the upside in Feb. On average, the actual prints were 0.4pp higher than forecast by consensus. The higher-than-expected inflation figures seemed to reflect the increase in the oil price during Feb, which has lifted gasoline prices and thus supported energy price inflation. Added to this it also seemed that food price inflation was higher than expected. 

- Based on the country figures released today, we expect euro inflation to increase to -0.2% y/y in Feb from -0.6% y/y in Jan (due for release on Monday). Hence, the euro area should remain in deflation in the near term, but the country figures released today suggest the period of deflation will be shorter than we had initially expected. 

- The relatively large, positive surprise reflects that food and energy price inflation are very volatile and account for the largest share of the absolute monthly variation in annual inflation . Energy price inflation explains above 50% of the monthly variation in annual headline inflation although it only has a weight of 10% of headline inflation.