Worries escalate over recession in the Eurozone as currency bloc slips further towards deflation

Chris Papadopoullos
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“There’s a real risk that the Eurozone is entering another recession” (Source: Getty)
Eurozone inflation hit a five-year low in September as weak spending continues to plague hopes of an economic recovery.

Prices rose just 0.3 per cent year-on-year in September according to figures published yesterday by official data house Eurostat.

The figure was down from 0.4 per cent in August and continues the single currency area’s apparent slide towards deflation.

The new data also revealed that seven out of 18 members of the single currency area are now seeing either falling or stagnant prices. Price falls have been recorded in Italy (down 0.1 per cent), Greece (down 1.1 per cent), Spain (down 0.3 per cent), Slovenia and Slovakia (both down 0.1 per cent). Prices were stagnant in Cyprus and Portugal.

“There’s a real risk that the Eurozone is entering another recession. The inflation number is dangerously close to zero,” Capital Economics’ senior European economist, Jennifer McKeown, said.

“We think the European Central Bank will probably announce a fullblown quantitative easing programme in the months ahead.”

Meanwhile, a separate set of data for the Eurozone revealed a 3.1 per cent drop in imports – signaling further deterioration of domestic demand.

Exports in August fell three per cent on an unadjusted, annual basis and slipped 0.9 per cent compared
with July (also adjusted for seasonal swings), Eurostat said.

The figures showed that Eurozone goods exports to Russia fell 14 per cent year-on-year in the first seven months of 2014. Overall the euro area showed a €9.2bn trade surplus.

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