March euro area HICP inflation quickened to -0.1% yoy from -0.3% yoy in February. Core inflation was at 0.6% yoy, down from 0.7% yoy in February. The energy component explained the bulk of the rise in inflation, up from -7.9% yoy to -6.0%, adding 20bp to the headline figure. Food, alcohol and tobacco price inflation accelerated slightly from 0.5% yoy to 0.6% yoy while non-energy industrial goods inflation rose to 0.0% yoy from -0.2% yoy.
The surprise came from services prices which dropped more than expected, down from 1.2% yoy in February to 1.0% yoy in March.
For the April reading, Societe Generale expects the same trends to continue with energy- and food prices rising. Prices paid for services should also inch up as the Easter holidays fell early in April this year, but it is the non-energy industrial goods component that should provide some downward pressure.
"HICP inflation to average around 0.3% in 2015 and 1.6% in 2016 while the core gauge should average 0.8% in 2015 and 1.1% in 2016", notes Societe Generale in a report on Monday.
