Inflation in the euro zone eased to an annual rate of 2.4 per cent in June from a two-year high in May and economic sentiment also slipped, data showed today.
The drop in inflation in the 12-nation bloc from May's 2.5 per cent provides welcome relief to the European Central Bank which meets tomorrow with economists not expecting any rate hike until economic recovery is on a solid path.
The decline in the overall indicator for economic sentiment to 99.8 from a revised 100.1 was due to deteriorating confidence in services and retail trade while industry confidence also declined slightly, the European Commission said.
The May figure was originally reported as 100.3. The fall wrong footed economists, who had expected economic sentiment to improve to 100.5.
The Commission also released a separate euro zone business climate indicator, which rose to its highest in more than three years due to a more positive assessment of industry managers about exports and order books.
The indicator rose to 0.43 in June after a small setback in May to 0.29. The last time it was this high was in March 2001 when it hit 0.63.
The decline in inflation was expected by economists following a fall in Germany's inflation rate.
In the absence of any further shocks from oil and food, the drop in June inflation may signal that euro zone inflation peaked in 2004 at 2.5 per cent in May, economists say.