Eurozone inflation is back

Hot air balloonsREUTERS/Mario ArmasHot air balloons participate in the Hot Air Balloons Festival in Leon, Mexico, November 19, 2010.

Eurozone inflation beat expectations in May.

Inflation came in at +0.3%, the first positive reading since November last year. Analysts had expected an increase of 0.2%.

In December, Europe’s consumer prices dropped into negative territory. In January, they dropped by 0.6% compared to the previous year.

Though it was mostly driven by oil prices, the decline sparked worries among economists that deflation would become ingrained in the weak European economy, as it had in Japan during the 1990s.

But inflation has quickly bounced back. Though it’s still at low levels, there’s a clear upward trend at the moment.

Core inflation beat expectations too, coming at +0.9%, the highest since August 2014. That’s a particularly encouraging figure since it strips out the effect of particularly volatile items, like food and energy prices.

This is just the latest in a growing pile of positive signs that have been rolling in for Europe since the beginning of the year. Though things remain depressed in comparison to their pre-crisis trends, there’s been a clear and growing improvement for the economy.

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