Europe's inflation eases to 6.9% as energy prices fall, food still up

Inflation in the 20 countries that use the euro currency slowed to 6.9 per cent in March, the lowest level in a year, with food costs still on the rise while energy prices fell, making a sharp turnaround after months of punishing increases.

Consumer prices in the eurozone dropped from the 8.5 per cent recorded in February, according to data released Friday by the European Union's statistics agency, Eurostat.

The inflation has dropped to its lowest level in a year since since peaking at 10.6 per cent in October.

But prices for food, alcohol and tobacco rose by a painful 15.4 per cent, faster than the previous month's 15 per cent, in a sign that European consumers are still getting squeezed.

Energy prices, however, fell 0.9 per cent an abrupt change of direction after rising at double-digit rates over the past year.

Russia's war in Ukraine pushed up prices for natural gas used to heat homes and generate electricity, fueling overall inflation, but the latest reading indicates that a mild winter and European efforts to store and source gas from sources outside Russia have paid off.

So-called core inflation, which excludes volatile food and energy prices, increased slightly to 5.7 per cent from 5.6 per cent the previous month.

That number can give a better sense of whether inflation is becoming entrenched into the economy over the longer term.