Germany’s inflation eased to a four-month low in March, whereas Italy’s rose to its highest in over a 12 months, highlighting diverging traits. The blended knowledge counsel uneven disinflation throughout the eurozone forward of the bloc’s inflation launch.
Preliminary client value knowledge for March revealed that Germany and Italy are on completely different inflationary paths, suggesting uneven progress in curbing value pressures throughout the eurozone.
Germany’s inflation eased to a four-month low, whereas Italy noticed an surprising rise, its highest annual studying since late 2023.
Germany’s inflation continues to sluggish
Germany’s client value inflation slowed to 2.2% year-on-year in March 2025, in accordance with a flash estimate from the Federal Statistical Workplace. This marks the bottom degree since November 2024 and aligns with market expectations.
The deceleration was pushed primarily by a notable slowdown in providers inflation, which eased to three.4% from 3.8% in February. Power costs fell additional, declining 2.8% in comparison with a 1.6% drop the earlier month.
Nonetheless, meals inflation edged increased to 2.9%, up from 2.4%. Core inflation—which strips out risky objects comparable to vitality and meals—cooled to 2.5%, its lowest degree since June 2021.
On a month-to-month foundation, client costs rose by 0.3%, down from 0.4% in February.
Germany’s harmonised index of client costs (HICP), which permits for cross-country comparability throughout the euro space, declined to 2.3% from 2.6%, just under the anticipated 2.4%. This marks the bottom HICP price since September 2024.
Italy posts shock inflation uptick
In distinction, Italy’s inflation price rose unexpectedly. Shopper costs elevated 2.0% year-on-year in March, up from 1.6% in February and beating analysts’ forecasts, in accordance with preliminary figures from Istat, the nationwide statistics workplace.
The acceleration was pushed by increased vitality and meals prices, in addition to upward pressures from leisure providers and the conclusion of winter clothes and footwear gross sales.
Non-regulated vitality costs rose 1.3% after a 1.9% decline in February. Tobacco costs additionally climbed, rising 4.6%, whereas unprocessed meals inflation accelerated to three.3%. Costs for communication providers and leisure actions continued to development increased.
In the meantime, the drop in costs of sturdy items moderated, and core inflation remained unchanged at 1.7%.
Eurozone implications
The divergent traits from Germany and Italy are shaping economists’ expectations for the broader euro space knowledge due on Tuesday.
Katya Vashkinskaya, an economist at Goldman Sachs, stated the agency has barely revised its euro space core inflation forecast for March all the way down to 2.39% year-on-year. Nonetheless, it raised its headline inflation projection to 2.15%, citing stronger-than-anticipated non-core pressures in Germany and Italy.
Economists count on the euro space headline inflation to sluggish to 2.2% in March, down from 2.3% in February, whereas core inflation is projected to ease to 2.5% from 2.6%.
Tariffs weigh on European markets
Markets confirmed restricted response to the inflation figures. The euro-dollar change price held regular at round 1.0810.
European equities, nevertheless, continued their downward development amid broader considerations tied to potential U.S. commerce tariffs anticipated to be introduced on 2 April by the Donald Trump administration.
Italy’s FTSE MIB led losses, falling 2.4%, adopted by France’s CAC 40 (-2.2%), Spain’s IBEX 35 (-1.9%) and Germany’s DAX (-1.5%). The Euro STOXX 50 dropped 2.3%, whereas the broader STOXX 600 shed 1.7%.
Banks and industrial shares bore the brunt of the sell-off. Shares in Société Générale tumbled 4.2%, UBS declined 4%, Deutsche Financial institution 3.4%, Banco Santander 3.2%, and UniCredit 2.9%.
Automakers additionally confronted promoting strain. Volkswagen shares misplaced 4.1%, BMW 3.9%, and Mercedes-Benz 3.3%, every on observe for a fourth consecutive session of declines. Porsche dropped 4.3%, heading for its ninth straight day of losses and its thirteenth up to now fourteen periods.