* Euro zone inflation at 2.6 percent in April yr/yr
* Oil prices, clothing keep it above ECB's target
* Flat imports growth underscores stagnant economy
By Robin Emmott
BRUSSELS, May 16 Costlier fuel and clothing kept
euro zone inflation well above the European Central Bank's
target in April, giving policymakers little room to stimulate
growth even though Germany has signalled it may tolerate higher
prices at home.
Consumer price inflation in the 17 countries sharing the
euro was 2.6 percent in April, the EU's statistics agency
Eurostat said on Wednesday, down from 2.7 percent in March but
still stubbornly high given Europe's drift towards recession.
Inflation remains at February's level since dropping from a
three-year high of 3 percent late last year, with the cost of
living ticking up even in depressed economies such as Spain and
Italy as oil prices remained close to all-time highs in April.
"Inflation should decrease moderately this year, but a lot
depends on the evolution of oil prices," said Clemente De Lucia,
a senior economist at BNP Paribas in Paris.
Consumer prices rose 0.5 percent in April from March, as
economists polled by Reuters had expected, driven by oil.
Energy prices jumped 1.1 percent on the month and clothes
prices were 2.3 percent higher. There was no change in the cost
of food and the cost of education and communications fell.
Brent crude slipped to $110.85 a barrel on Wednesday
as deep uncertainty surrounding new Greek elections clouded the
economic outlook in Europe, but were still around $120 for much
Economists see inflation coming down during the year as the
euro zone struggles with record unemployment and weak business
morale, but the ECB says prices will still be above the bank's
"close to but below two percent" level for the rest of 2012.
That appears to rule out an unprecedented move by the ECB to
take interest rates to below the current 1 percent level in the
coming months, although senior German policymakers have sent
clear signals that they are willing to accept a stronger rise in
German prices than may have been tolerable in the past.
"The ECB seems generally reluctant to take euro zone
interest rates any lower given sticky inflation," said Howard
Archer, chief European economist at IHS Global Insight.
Acceptance of higher inflation in Europe's biggest economy,
partly through higher wage deals, could help struggling states
in Europe's southern periphery by lifting demand for their goods
and improving their competitiveness relative to Germany.
A day after Eurostat data showed that the euro zone's
economy stagnated in the first quarter of 2012, the weakness was
again highlighted by the lack of growth in imports to the euro
zone in March, according to seasonally unadjusted Eurostat data.
Exports in March grew 4 percent after a double-digit rise in
February, as Chinese demand cooled with the economy there.
Adjusted for seasonal effects, imports shrank 1.1 percent
month-on-month in March and exports declined 0.9 percent,
underlining the deceleration in the economy.
Trade registered a surplus of 4.3 billion euros on a
seasonally adjusted basis, slightly higher than the 4-billion
euro level in February, but that was mainly due to the decline
of imports, rather than signs of growth.
"This reflects a poor level of economic activity in the euro
zone and an even worse domestic demand," said Dominique Barbet,
an economist also at BNP Paribas.
Most euro zone governments are imposing austerity policies,
often at great cost to their electorates and to growth, hoping
to counter the debt crisis by cutting their budget deficits.
But weak or shrinking economic output is making it harder to
reach the EU-mandated targets, calling into question the wisdom
of cutting so deeply.
Optimism in January that the euro zone would recover quickly
in 2012 has been crushed by unexpected contractions in
manufacturing, consumer confidence and business morale, while
one in 10 euro zone workers is out of a job.