Euro area inflation decreases to 4-month low

In March 2024, inflation in the euro area fell from 2.6% to 2.4%, as reported by Eurostat on Wednesday, marking a fourmonth low and confirming preliminary data.

The euro area comprises countries that use the euro as their national currency within the European Union.

The main components contributing to inflation vary. In March, services saw the highest yearly increase, remaining at 4.0% compared to February. Following this, food, alcohol, and tobacco had a rate of 2.7%, down from 3.9% in the previous month.

Non-energy industrial goods rose by 1.1%, a decrease from 1.6% in February, while energy prices experienced a decrease of 1.8%, which was less steep than February's -3.7% drop.

In the euro area, inflation is determined by averaging the weighted Harmonised Index of Consumer Prices (HICP). However, the main components contributing to inflation vary in importance.

In 2024, services make up the largest portion, accounting for approximately 44.9% of household spending in the euro area, followed closely by nonenergy industrial goods at around 25.7%.

Food, alcohol, and tobacco, as well as energy, represent 19.5% and 9.9% respectively. Despite their smaller share of spending, their prices can fluctuate significantly, having a considerable impact on inflation.

In the euro area, inflation rates can differ between countries due to specific events, varying trade and consumption patterns, and different financial systems, according to the European Central Bank.