Euro zone inflation up, economic sentiment weakens

By @ibtimes on

Euro zone inflation rose further above the European Central Bank's target in April, data showed on Friday, increasing the chances of another interest rate rise in June, despite a weakening of economic sentiment.

The European Union's statistics office Eurostat estimated consumer prices in the 17 countries using the euro rose 2.8 percent year-on-year this month, more than market consensus of a stabilization at 2.7 percent. The ECB meets on interest rates next Thursday.

A monthly European Commission survey showed, however, that economic sentiment in the euro zone fell for the second month in a row to 106.2 in April, down from 107.3 in March and below market expectations of a decline to 107.0.

The decline in sentiment was in all sectors of the economy except construction, with consumer optimism falling the most to -11.6 from -10.6 in March.

Consumer inflation expectations, which have been rising quickly since November 2010, edged marginally lower to 30.7 from 30.8. Selling price expectations among manufacturers, on the rise since August 2010, fell more markedly to 21.5 from 24.4.

The European Commission's business climate indicator, which points to the phase of the business cycle, also fell for the second month in a row, to 1.28 points from 1.43 in March.

Despite this, the current level of the indicator remains close to historic peaks, suggesting that the recovery in industry will continue in the coming months, the Commission said.

(Reporting by Jan Strupczewski, editing by Rex Merrifield)

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