February: +0.3% m/m, +0.9% y/y January: -0.8% m/m, +1.0% y/y December: +0.3% m/m, +0.9% y/y November: +0.1% m/m, +0.5% y/y October: +0.2% m/m, -0.1% y/y September: flat m/m, -0.3% y/y

FRANKFURT (MNI) - Eurozone consumer prices rebounded 0.3% in February as generally expected, with most major components registering gains on the month, Eurostat reported on Tuesday.

As a result, the annual inflation slowed to +0.9%, Eurostat said, confirming its preliminary estimate, despite the upward revision to Germany's inflation rate and the stronger-than-expected French HICP figure.

Core inflation, which excludes energy prices (-0.3% m/m, +3.1% y/y) and food, alcohol and tobacco costs (flat m/m, -0.1% y/y) came to +0.8% y/y, a new all-time low, and was down 0.1 point from January's level.

Prices excluding both energy and unprocessed food costs, the core rate followed by the European Central Bank, also came in at a record low +0.8%.

Among the more heavily weighed components of the index, recreation and culture costs registered the strongest rise on the month (+1.1%), boosted by a 5.9% jump in package holidays, while both food and housing maintenance prices rose modestly (both +0.1%).

Year-over-year, the most significant rise was in transport costs (+4.3%), with fuels for transport alone jumping 13.2% compared to February 2009. Conversely, food prices slipped 1.1%.

Consumer prices in Germany recovered 0.4% on the month in February, while in France, consumer prices were 0.6% higher, doubling general expectations. The Italian harmonized consumer price index was unchanged on the month.

As oil prices reached a trough in early 2009, energy base effects on annual inflation rates are likely to wane in the coming months.

However, oil prices have recovered considerably from lows in early February, as fiscal worries over Greece receded and geopolitical tensions in Iran, Nigeria, Iraq and the Malacca Straits moved to centre stage. This suggests that base effects may persist for a while.

Other commodity prices, including food, are likely to fuel consumer prices over the medium term, as demand from emerging economies grows, the International Monetary Fund said in its latest World Economic Outlook report.

Counter-acting this effect are factory-gate prices, which declined for the 16th consecutive month, according to firms polled for the latest purchasing managers index (PMI).

Looking ahead, a majority of manufacturers and service providers canvassed by the European Commission continue to see price developments below normal in the near term. A growing proportion of retailers also see prices declining in the near term.

For the fourth consecutive month, consumers have revised up their assessment of price trends over the coming year, the Commission added. However, expectations still lie well below the long-term average.

Late last month, the European Commission confirmed its Eurozone inflation forecast of +1.1% for 2010, The latest ECB staff projections foresee CPI growth ranging between +0.8% and +1.6% this year and between +0.9% and +2.1% in 2011.

"All in all, we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households," ECB President Jean-Claude Trichet said earlier this month.

"Inflation expectations remain firmly anchored in line with the Governing Council's aim of keeping inflation rates below, but close to, 2% over the medium term," he said.