Top two Eurozone economies hit by price deflation in 2013

Ben Southwood
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CONSUMER prices fell into decline in Germany and France in January, according to figures released yesterday.

Both countries were hit with a 0.5 per cent fall in their consumer price indices (CPI) last month, as the Eurozone crisis continues, although over the year the two Eurozone giants still saw prices rise.

Annual inflation was 1.7 per cent in Germany, its official statistical body Destatis said, while French equivalent Insee put its CPI inflation at 1.2 per cent over the year.

Economists worry about deflation because it can lead to price imbalances in an economy, which require a difficult period of adjustment to iron out, potentially including a large increase in unemployment.

And with the price data came gloomy confidence surveys from both Insee and the European Commission (EC), both released separately yesterday.

Consumer confidence edged up only 0.3 in the Eurozone during February, the EC said, staying well below zero at minus 23.6.

And the economic sentiment indicator crept up 1.4 points, to reach 89.2, still far below the long term average of 100, and significantly worse than for most of the Eurozone crisis so far.

The French business climate indicator, from Insee, did worse, staying flat at 87 in February, where it has been since December, still far below the long-term average of 100, as the country’s economy remains depressed.