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Energy Prices Cause Sharpest Slowdown In OECD Annual Inflation Since The Financial Crisis

Annual inflation in the OECD area slowed significantly to 1.7% in March 2020, compared with 2.3% in February, the largest deceleration since the financial crisis, as energy prices fell by (minus) 3.6% in March following a rise of 2.3% in February. Food price inflation, on the other hand, increased to 2.4% in March, from 2.0% in February. Excluding food and energy, OECD inflation was broadly stable at 2.1 % in March, compared with 2.2% in February.

Estimates for the OECD area in April are not currently available but Eurostat’s flash estimate[1] for the Euro area points to inflation continuing to slow (to 0.4% compared to 0.7% in March) on the back of further falls in energy prices.

In March 2020, annual inflation slowed in all major economies except Japan where it was stable at 0.4%. Annual inflation decreased sharply in Canada (to 0.9% in March, from 2.2% in February), the United States (to 1.5%, from 2.3%), France (to 0.7%, from 1.4%), and more moderately in Germany (to 1.4%, from 1.7%), the United Kingdom (to 1.5%, from 1.7%) and Italy (to 0.1%, from 0.3%).

Annual inflation in the Euro area, as measured by the HICP[2], also decreased sharply (to 0.7%, from 1.2%) but more moderately, when excluding food and energy (1.0%, from 1.2%).

Among non-OECD G20 economies, annual inflation decreased in Argentina (to 48.4%, from 50.3%), India (to 5.5%, from 6.8%), China (to 4.3%, from 5.2%), Brazil (to 3.3%, from 4.0%), South Africa (to 4.1%, from 4.5 %), and Indonesia (to 3.0%, from 3.1%). Inflation increased in Saudi Arabia (to 1.5%, from 1.2%) and the Russian Federation (to 2.5%, from 2.3%). Annual inflation in the G20[3] area as a whole also decreased to 3.2% compared with 3.8% in February.

[1] Eurostat note: “Data collection for HICP has been affected by the COVID-19 crisis in all euro area countries. Eurostat and the Member States’ national statistical institutes have agreed a set of procedures to estimate prices that could not be collected due to mobility restrictions or closures of outlets. All information about these procedures is available on the Eurostat website section on inflation.”

[2] HICP (Harmonised Indices of Consumer Prices) published by Eurostat.

[3] On 11 July 2017, the Argentinian Authorities started to publish a new national CPI (December 2016 = 100) covering the whole country. This officially reported CPI-series starts in December 2016, and has now been included in the G20 aggregate, from January 2018 onwards. The inclusion of the Argentinian CPI in the G-20 aggregate entailed a clear break in the series.

Working with over 100 countries, the OECD is a global policy forum that promotes policies to improve the economic and social well-being of people around the world.

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