Yearly inflation in the eurozone is expected to drop to 2.6 percent in February, down from 2.8 percent in January, according to data published by Eurostat on Friday.
Inflation in the eurozone is still mainly driven by the prices of food, alcohol and tobacco, for which year-on-year inflation should stand at 4 percent for February, down from 5.6 percent the previous month, according to the European Union’s statistics agency. Service prices also saw a decrease in yearly inflation from 4 percent in January to 3.9 percent in February.
“Another mild winter pushing down natural gas prices is helping the eurozone economy to come out of the doldrums,” said Peter Vanden Houte, chief economist for the eurozone at ING banking group.
Although this has helped sentiment indicators, Vanden Houte added that Germany’s economy, the largest in the bloc, is still weak. This is weighing on the overall growth of the eurozone, he said.
The manufacturing sector is still digesting a surplus of inventory, while consumer demand for services is increasing. Vanden Houte expects the inventory correction to be over by the summer, which will boost the manufacturing sector.
