Consumer confidence downturn carries into 2011, as fear over inflation spreads

 
Julian Harris
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CONSUMER confidence has slipped further in the Eurozone, it was revealed yesterday, as inflation continues to squeeze spending and concern policymakers.

The European Commission’s initial “flash” estimate of consumer morale for this month dropped to an index rating of -11.4, from -11 in December.

Confidence on the high streets of the single currency area had been increasing through 2010 and reached a 35 month high in November.

But then the index tumbled by 1.6 points in December, and has declined further in the new year.

The news came after European central bankers repeated the need to keep a close eye on price pressures after more inflationary figures emerged from the Eurozone’s largest economy, Germany.

ECB policymaker Lorenzo Bini Smaghi warned that exiting an accommodative monetary policy too late can sow the seeds of future imbalances.

The German producer price index (PPI) increased by 0.7 per cent in December compared to the previous month, and 5.3 per cent on the previous year.

And month-on-month price inflation hit half a per cent even with energy prices excluded, according to Hetal Mehta of Daiwa Capital Markets. “This signals an acceleration in the pace at which underlying prices are rising,” she said.