Deflationary pressure rises as Europe prepares bond purchases

 
Chris Papadopoullos
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EUROZONE producer prices dropped by 0.9 per cent in January compared with December, according to figures released yesterday by Eurostat, the statistical office of the EU.

Year-on-year, producer prices fell by 3.4 per cent in Jan­uary, a sharper drop than Decem­ber’s 2.6 per cent. Producer prices capture price movements prior to the retail level. They may give an indication of subsequent price changes for businesses and consumers which may make them an early indicator of inflation. Inflation in the Eurozone is currently below zero.

“This suggests that Eurozone deflation could persist for some time,” said economist Howard Archer from market analysts IHS.

“Much will depend on whether oil prices build on their recent rally, stabilise or fall back anew.” The European Central Bank is poised to start buying government debt this month to raise inflation.