Oil price boosts eurozone inflation

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Oil price boosts eurozone inflation

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Inflation continues to rise in the eurozone even though the region’s economy is almost certainly in recession.

High world oil prices are being blamed with Brent crude near $120 a barrel.

The EU’s statistics agency has just revised upwards its initial reading for March saying consumer prices in the 17 countries using the euro were up 2.7 percent from a year ago, the same level as in February. Its first estimate for March was 2.6 percent.

Most economists believe the euro area’s economy has slipped into recession after a contraction in the last quarter of 2011 and with a subsequent probable shrinkage in the first three months of this year.

Were it not for energy costs inflation would likely reflect the depressed economy where rising unemployment, government cuts and weak business confidence have eroded consumers’ willingness to spend.

Energy accounted for about 0.6 percentage points of the eurozone’s inflation level in March, meaning that without the high cost of fuel, gas and heating oil, consumer prices would be around the European Central Bank’s target of below, but close to 2.0 percent.

Annual inflation in March was as high as 3.8 percent in Italy and 3.1 percent in Belgium, while only 2.3 percent in Germany and 1.8 percent in Spain.