Eurozone inflation lingers near zero despite ECB boost
December data signals that successive waves of action to jolt prices higher are ineffective
Eurozone inflation remained lower than expected in December, official data said yesterday, adding pressure on the European Central Bank (ECB) to ramp up its efforts to boost the economy in Europe.
ECB president Mario Draghi disappointed markets last month with a limited bid to revive the struggling Eurozone given near-zero inflation levels across the 19 countries that share the euro.
The EU’s Eurostat statistics agency said inflation was unchanged in December at a moribund 0.2 per cent, lower than analysts’ forecast of 0.3 per cent inflation for the period.
This is well below the ECB’s official target of near or just below 2.0 per cent and signals that successive waves of ECB German unemployment fell by more than expected in December and the jobless rate held at its lowest level since reunification in 1990, putting Europe’s largest economy on a solid footing going into the new year.
The seasonally adjusted unemployment total fell by 14,000, figures from the Federal Labour Office yesterday showed. The drop was more than double the 6,000 forecast in a Reuters poll of economists. The unemployment rate remained at a record low of 6.3 per cent. action to jolt prices higher in Europe are so far ineffective.
“The failure of Eurozone inflation to pick up in December is good news for consumers’ purchasing power, but it will maintain ECB concern that prolonged very low inflation could lead to a renewed weakening in inflation expectations,” said Howard Archer, Chief European Economist for IHS Global Insight.
Inflation in December was again dragged down by energy prices, led by oil, but this drop slowed sharply to 5.9 per cent annually instead of 7.3 per cent the previous month, the data showed.
Core inflation, which strips out fluctuating energy prices as well as alcohol and tobacco, remained stable at 0.9 per cent from November.
Analysts warned that oil prices were again on a downward track and could push Eurozone inflation into negative territory down the road.
“With the oil price languishing below $40, headline inflation looks set to remain low in the months ahead. Unless oil prices rise, headline inflation might even briefly dip below zero again in the summer,” said economist Teunis Brosens of ING Bank in the Netherlands.