Soaring oil prices sent euro zone inflation surging in October but have yet to dent economic sentiment, data showed on Friday. The year-on-year inflation rate leapt to 2.5 percent in October from 2.1 percent in September, rising further than economists had expected from the European Central Bank's goal of keeping it close to but below 2 percent. The latest reading matched the peak set in May when inflation hit its highest since March 2002 and comes in the wake of a strong rally in oil prices. "The main impact seems to have come from the rise in energy prices," a Eurostat official said. The ECB, which sets interest rates for the dozen countries that share the euro, has already flagged the risk that increases in oil prices, which have set record highs, will fan inflation and leave households with less money to spend on other things.
The latest data, which is an early sounding of consumer prices, is guaranteed to keep them on alert. Still, euro zone economic sentiment is holding up well, unexpectedly rising in October as better morale in industry, retail trade and construction more than offset a setback in consumer confidence, separate European Commission data showed. Economic sentiment climbed to 101.3, above economists' expectations of a 100.50 reading, as industry sentiment rose to minus 2 from minus three in September and morale in retail trade improved to minus 6 from minus 9. Construction sentiment rose to minus 14 from minus 16. However, consumer sentiment fell back to minus 14, erasing the gain seen in September when it had risen to minus 13. Economists polled by had forecast readings of minus 13 and minus 4 for consumer and industrial sentiment respectively.///