Industry price slump speeds up in Eurozone

PRODUCER prices in the Eurozone declined at the fastest rate in more than three years in the 12 months to February, falling 1.7 per cent as broader inflation slumps.

The year-on-year drop is the largest since December 2010, but without including the 4.4 per cent drop in domestic energy prices, the decline would only have been 0.5 per cent.

Of the major economies, French and Italian producer prices fell by more than the average, down by 1.8 and 2.9 per cent respectively. In comparison, Germany’s factory prices have fallen by only 0.8 per cent in the same period.

Despite falling prices for industry, Howard Archer of IHS Global Insight said he thinks the European Central Bank (ECB) will sit on its hands: “The general impression we get from ECB officials’ comments is that the they don’t believe circumstances warrant policy action at this stage.”

A report also released yesterday by Bank of America Merril Lynch suggests some Eurozone countries are very unlikely to see deflation: the research suggests Germany’s risk of falling prices is at the lowest level since 2011. In comparison, Spain is described as “highly vulnerable”.