Eurozone prices continue downwards in September

Prices across the 16 nations using the euro fell in September for the fourth month running, official figures showed yesterday.

The 0.3 per cent fall in the cost of living across the eurozone, according to an initial estimate by the official Eurostat EU data agency, was bigger than the confirmed 0.2-per cent fall registered in August.

The inflation figures marked the fourth monthly fall running for consumer prices, the first such decline since households began paying for goods in euro notes and coins at the start of 2002.

August’s more modest price fall was far smaller than the record 0.7 per cent fall in July and had raised hopes that prices were stabilising as Europe crawls out of recession.

Howard Archer, chief economist at IHS Global Insight said September’s figures could be a blip on an upward trend.

“The renewed widening in Eurozone deflation is likely to prove a temporary development, primarily resulting from lower energy prices,” he said.

“Unfavourable base effects resulting from the very sharp fall in oil prices in the latter months of 2008 and early 2009 still seem highly likely to push consumer price inflation back into positive territory before the end of the year,” he added.

Nevertheless, eurozone inflation is likely to remain below the European Central Bank’s target of close to, but just below two per cent for some time as underlying inflationary pressures are held down by large and still expanding output gaps across the region, high and rising unemployment and the relatively strong euro.

Jean-Claude Juncker, chairman of the euro group of nations, said on Tuesday that the eurozone economy had steadied after the plunge of the global economic crisis. Mr Juncker, who chairs the group of eurozone finance ministers, said that the economy has “broadly stabilised”, suggesting that the worst of the crisis was over.

But he warned that the “situation remains fragile and flaky” and that an economic upturn could be very limited in Europe.

The European Commission is backing the European economy to climb out of recession in the third quarter, which ends Wednesday.

IHS analyst Archer underlined the fragility of the recovery.

“Even if the eurozone returns to growth in the third quarter as now seems highly probable, sustained above-trend expansion is likely to prove elusive for some considerable time to come due to the still serious economic and financial handicaps that the region faces,” he warned.