Eurozone consumer prices rose more slowly than first estimated in the 12 months through March, a fresh setback for the European Central Bank in its lengthening struggle to meet its inflation target.
The European Union’s statistics agency Wednesday said prices were 1.3% higher than a year earlier, a pickup in the annual rate of inflation from the 1.1% rate recorded in February. But that was lower than Eurostat’s initial estimate of 1.4%, which had itself been surprisingly low.
Eurostat also reported that construction was 0.5% lower in February than in January, and just 0.4% higher than in the same month a year earlier. That was the weakest reading since the start of 2017.
The eurozone’s economy grew at the fastest pace in a decade during 2017 but appears to have slowed in the first quarter of 2018. Industrial production fell for the third straight month in February, its longest slide since 2012, and there have also been signs of unexpected weakness in surveys of purchasing managers at manufacturers and service providers, measures of retail sales, and barometers of confidence among households and businesses.
That combination of lower-than-expected inflation and slowing growth is likely to reinforce the ECB’s caution as it mulls when and how quickly to withdraw its stimulus measures. Responding to the surprisingly strong growth recorded in the second half of last year, the ECB halved its monthly bond purchases in January and is expected to close down the stimulus program known as quantitative easing by the end of this year.
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Although smaller than expected, the March rise in inflation ended a run of three straight months of decline that was largely due to energy prices. Economists that rise to mark the start of a steady climb higher over coming months, and inflation may touch the ECB’s target later this year. However, that is likely to prove temporary.
The less volatile core measure of inflation—which strips out highly changeable items such as energy and food—is expected to record a slower climb. The measure hasn’t been higher than 1.2% over the last half-decade, and a rise above that recent ceiling would mark significant progress for the central bank as it considers further steps to dial back on its support for the economy. But the core rate of inflation was unchanged at 1.0% in March.
The ECB’s governing council next announces a policy decision on April 26, although analysts aren’t expecting to see much that is new. The June gathering is regarded as potentially more significant, and policy makers should by then have some sense of whether the first-quarter slowdown was temporary or lasting.
Most economists expect to see a rebound, noting that unusually cold weather and strikes in Germany’s metal and electrical industries were largely responsible for the sluggish start to the year. In its latest report on the global economies outlook released Tuesday, the International Monetary Fund raised its eurozone growth forecast for this year to 2.4% from the 2.3% it projected in January.
Write to Paul Hannon at paul.hannon@wsj.com