A recurrent theme of our reports over the last couple of months has been the continuation of low consumer price inflation despite high energy prices. This phenomenon has persisted through April in several European countries that reported their latest CPI data today.

This is especially evident in France, where the total CPI has even slowed somewhat in the face of the recent surge in energy costs. The first four months of 2005 averaged year-on-year inflation of 1.8%, compared with a five-year average of 2.0%. Food is cheaper, clothing prices are little changed and manufactured goods have declined outright. Services prices have been rising 2.7%, but this is less than their 3%+ pace in 2002.

In Finland and Sweden, which we mentioned here a month ago, the 12-month change in total CPI ticked up by 0.1% and 0.2%, respectively from their March rates. But that still leaves Finland at 1.1% and Sweden at a mere 0.3%. In Spain, total inflation was 3.5% year-on-year in April, with some signs of upward creep. But the pace excluding energy has been steady at 2.9% for the last two years.

Perhaps we are simply short-sighted in these comments; perhaps it simply takes longer than a year for the "second-round" effects of sustained energy prices to filter through to other items. Or perhaps, as we noted elsewhere recently, the second-round effects will appear more as restraints to demand growth than spurs to higher inflation.