Accessibility/Mobile Features
Skip Navigation
Skip to Content
Editorial News
Business
Classified Sites

The Canadian Press - ONLINE EDITION

Eurozone inflation rate drops further in July to 0.4 per cent while unemployment falls slightly

BRUSSELS - The inflation rate in the 18-nation eurozone dropped again in July, official data showed Thursday, likely adding pressure on the European Central Bank to beef up its efforts to spur the economy.

In a preliminary estimate, Eurostat, the European Union's statistical agency, said inflation fell to 0.4 per cent from the previous month's 0.5 per cent, where analysts were predicting it to remain. Inflation is at its lowest reading since October 2009, when the world economy was hit by a raging financial crisis that caused severe recessions.

Low inflation is a worry because it can lead to deflation, in which falling prices choke off growth. Escaping from deflation can take years, if not decades, as in Japan's case.

"The ECB has more work to do to tackle the risk of deflation," said analyst Jonathan Loynes of Capital Economics.

The ECB has already cut interest rates and vowed to get inflation back toward the 2 per cent target within two years. But it has so far refrained from the bolder step of large-scale asset purchases, a policy that other major central banks like the U.S. Federal Reserve have used with some success.

Howard Archer, economist at analysis group IHS, said the drop in the overall inflation rate is partly attributable to a fall in energy prices, which are volatile. In fact, the core inflation rate, which excludes volatile food and fuel costs, remained unchanged on the month at 0.8 per cent.

Thursday's figures nevertheless come as "a blow for the ECB," especially since the economic outlook remains weak, suggesting inflation is unlikely to rise anytime soon.

"There is undeniably a very real risk that eurozone consumer price inflation could go lower still ... barring an appreciable rise in oil and gas prices resulting from geopolitical factors hitting supplies," he said, referring to the current tension with Russia, which is a major oil and gas supplier for Europe.

The ECB in June already cut its benchmark interest rate to 0.15 per cent and cut another rate into negative territory for the first time to counter the threat posed by low inflation. It also promised billions in cheap loans for banks on condition they lend more to businesses.

Analysts say the next step to help shore up the bloc's weak economy and inflation rate would be launching a program of asset purchases. Such a program involves injecting new money into the economy by buying large amounts of bonds and other financial assets.

The eurozone officially came out of recession in last year's second quarter, but growth remains weak. Output grew by only 0.2 per cent in the first quarter from the previous three-month period.

In more upbeat data, the eurozone's unemployment rate fell slightly from 11.6 per cent in May to 11.5 per cent in June, its lowest value since September 2012, Eurostat said. The drop beat analysts' consensus expectations, which forecast the jobless rate to stay flat, according to data service FactSet. The number of jobless in the eurozone fell by 150,000 to 18.4 million in the eurozone, which encompasses 330 million people.

For the wider 28-nation EU, which includes members like Britain and Poland that don't use the euro currency, unemployment dipped from 10.3 per cent to 10.2 per cent.

___

Follow Juergen Baetz on Twitter at http://www.twitter.com/jbaetz

  • Rate this Rate This Star Icon
  • This article has not yet been rated.
  • We want you to tell us what you think of our articles. If the story moves you, compels you to act or tells you something you didn’t know, mark it high. If you thought it was well written, do the same. If it doesn’t meet your standards, mark it accordingly.

    You can also register and/or login to the site and join the conversation by leaving a comment.

    Rate it yourself by rolling over the stars and clicking when you reach your desired rating. We want you to tell us what you think of our articles. If the story moves you, compels you to act or tells you something you didn’t know, mark it high.

Sort by: Newest to Oldest | Oldest to Newest | Most Popular 0 Commentscomment icon

You can comment on most stories on brandonsun.com. You can also agree or disagree with other comments. All you need to do is register and/or login and you can join the conversation and give your feedback.

There are no comments at the moment. Be the first to post a comment below.

Post Your Commentcomment icon

Comment
  • You have characters left

The Brandon Sun does not necessarily endorse any of the views posted. Comments are moderated before publication. By submitting your comment, you agree to our Terms and Conditions. New to commenting? Check out our Frequently Asked Questions.

letters

Make text: Larger | Smaller

Election 2014
Brandon Sun Business Directory
The First World War at 100
Why Not Minot?
Welcome to Winnipeg

Social Media

Canadian Mortgage Rates