Eurozone deflation accelerates to record low in January

Eurozone consumer prices fell by a record-equalling 0.6 percent in January, confirming deflation could be taking hold for the long term, EU data showed Wednesday.

Eurozone consumer prices fell by a record-equalling 0.6 percent in January, confirming deflation could be taking hold for the long term, EU data showed Wednesday.

The drop from minus 0.2 percent in December appears to back the European Central Bank`s decision last week to launch a bond-buying spree to drive up prices.

Plummeting world oil prices were largely to blame for the fall in the 19-country eurozone, already beset by weak economic growth and high unemployment, the EU`s data agency Eurostat said.

The low level matches the same drop in prices as in July 2009, at the worst of the global financial crisis.

"Falling prices today and alarmingly pessimistic expectations of where prices are heading in the future proves beyond all reasonable doubt it was high time to act," Richard Barwell, senior European economist at Royal Bank of Scotland Group told Bloomberg.

But he added it was "risky starting QE this late in the deflation game."

The ECB last week finally decided to embark on a quantitative easing programme involving the purchase of 1.14 trillion euros ($1.29-trillion) in sovereign bonds.

In a deflationary spiral, businesses and households delay purchases, throttling demand, triggering recession and causing companies to lay off workers.

Energy prices in the eurozone, which added Lithuania on January 1, sank a huge 8.9 percent in December, greater than an already steep fall of 6.3 percent a month earlier.

Oil prices have plummeted in recent weeks, as OPEC maintains its production levels despite weak demand.

The European Union`s data agency Eurostat also reported that unemployment slipped to 11.4 percent in December, down from 11.5 percent in November and 11.8 percent a year before.

It was the lowest level since August 2012.

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