Eurozone inflation falls in October as deflation fears rise

15:28 • 28.11.14
Economy

The eurozone's inflation rate fell to 0.3% in November, from 0.4% in October, suggesting that deflation remains a threat for the 18-nation bloc.

Eurostat, the European Union's statistics agency, said that the rate was pulled down by lower energy prices.

The European Central Bank considers anything below 1% to be in its deflation "danger zone".

The eurozone's low inflation is blamed for undermining growth, which has prompted ECB stimulus measures.

A fear among policymakers is that if deflation takes hold, consumers and companies will delay purchases in the hope prices will fall further.

Consumer inflation has not been at the ECB's target level of close to, but below 2% since the start of 2013 and has been falling since a 3% peak in late 2011.

Eurostat said energy prices fell 2.5% from October and by 1.1% on an annual basis. Core inflation, stripping out energy and food prices, was 0.7%, unchanged from October.

Earlier this week, Germany's inflation reading fell to its lowest for nearly five years.

Separately, Eurostat said eurozone unemployment remained at 11.5% in October, unchanged from September.

However, the number of unemployed actually rose by 60,000, the biggest monthly jump since January 2013.

In Germany, the October rate fell slightly to 4.9% from the month before, and was unchanged in France at 10.5%.

But in the eurozone's third largest economy, Italy, the rate reached a new record, jumping to 13.2% from a revised figure of 12.9% in September.

Jonathan Loynes, chief european economist at Capital Economics, said the inflation and jobless data "gives the ECB yet another nudge to take urgent further action to revive the recovery and tackle the threat of deflation".

With energy prices expected to fall further over the coming, Mr Loynes said, "we now expect the headline inflation rate to drop below zero at least briefly over the next six months and there is a clear danger of a more prolonged bout of falling prices".
 

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