Eurozone deflation could persist for months after producer prices tumble in January

Chris Papadopoullos
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Prices paid by producers in the Eurozone dropped sharply in January (Source: Getty)

Wholesale prices in the Eurozone have fell sharply in January, underscoring the risk that inflation could remain subdued for longer.

Industrial producer prices, also referred to as factory gate prices, dropped one per cent in January, EU statistical office Eurostat said today.

Compared with the same month last year they were down 2.9 per cent. The drop was due to energy-related goods. Energy prices paid by producers fell 3.2 per cent in January and are down 8.6 per cent compared with the same month last year.

Excluding energy prices, producer prices were flat on the month.

“January’s further sharp drop in producer prices highlights the risk that Eurozone deflation could persist for the next few months at least,” said economist Howard Archer from analysts IHS.

“January’s sharp drop in Eurozone producer prices keeps up what seems like relentless pressures on the ECB to enact appreciable stimulus at its March meeting. The ECB is facing renewed Eurozone deflation, low inflation expectations and stuttering economic activity.”

The Eurozone fell into deflation in February. An early estimate from Eurostat suggested annual inflation had fallen to 0.2 per cent.

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