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Eurozone inflation up on holiday spending

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Eurozone inflation up on holiday spending
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Christmas holiday spending nudged up prices in the eurozone in December.

The cost of living in the 17 countries sharing the euro had been forecast to fall slightly, but instead it rose more than expected and was up 2.2 percent from a year earlier, the same as in November.

However inflation remains benign enough to allow the European Central Bank to cut interest rates this year, to support the region’s feeble economy.

The price increases were most marked in food and services, which together make up 60 percent of Eurostat’s index, despite a cooling in the rate of energy price rises.

Food and services inflation suggests households spent a little more freely during the holiday season after months of holding back as families and businesses struggle through Europe’s worst economic and banking crisis in a generation.

In Germany, Europe’s biggest economy, separate data showed consumer prices in six states climbing much more than expected in December. Germany’s private sector expanded for the first time in eight months in December.

“Travel, hotel and restaurant prices have picked up and this year the rise was a little sharper than on average in past years,” said Ulrike Rondorf, an economist at Commerzbank.

European companies and policymakers alike are anxious for any signs of a recovery in the eurozone’s economy, which is expected to contract in 2013 while the rest of the world’s big economies grow.