May 3, 2019 / 9:07 AM / 24 days ago

Euro zone inflation accelerates in April on energy, services

BRUSSELS, May 3 (Reuters) - Euro zone price growth accelerated by more than expected in April, boosted by more costly energy and services and the core inflation measure watched closely by the European Central Bank rose as well, according to initial estimates released on Friday.

The European Union statistics office Eurostat said consumer prices in the 19 countries sharing the euro increased 1.7 percent year-on-year in April, accelerating from 1.4 percent in March and above market expectations of a 1.6 percent rise.

This is the highest reading since October 2018.

The ECB wants to keep inflation below, but close to 2 percent over the medium term and has postponed late last year any tightening of its monetary policy because of an expected slowdown of the euro zone economy.

Some economists had cautioned that the late timing of Easter in 2019 compared to 2018 probably distorted the prices of holiday-sensitive items, such as hotels and travel, with a downward impact for March and a boost for April this year.

Inflation in April accelerated mainly because of energy, the prices of which increased 5.4 percent year-on-year after a 5.3 percent rise in March.

Processed food, alcohol and tobacco prices rose 1.7 percent year-on-year, decelerating form a 2.0 percent rise in March.

Excluding the volatile components of unprocessed food and energy, what the ECB calls core inflation and watches closely in policy decisions, prices grew 1.3 percent year-on-year in April, up from 1.0 percent in March.

The even narrower measure watched closely by market economists which excludes energy, food, alcohol and tobacco, accelerated to 1.2 percent in April from 0.8 percent in March.

The prices of services, which make up more than two thirds of euro zone gross domestic product, also rose sharply to 1.9 percent year-on-year, the highest reading in two years, from 1.1 percent in March.

Separately, Eurostat said euro zone prices at factory gates eased 0.1 percent month-on-month in March for a 2.9 percent year-on-year rise, falling short of market expectations of a 0.0 percent monthly reading and a 3.0 percent annual gain.

Changes in producer prices are an early indication of trends in consumer prices, because unless they tends to be passed on by retailers and intermediaries to consumes. (Reporting By Jan Strupczewski and Philip Blenkinsop)

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