ECONOMIC confidence in the Eurozone’s recovery has dropped to the lowest level so far this year, as the currency union’s recovery from recession looks increasingly fragile.
The European commission’s own economic sentiment indicator fell again, dropping to 100.6, just above the level with denotes the long-term average confidence level. The measure is now at its lowest level in 2014 so far, and has been declining since May.
German inflation was unchanged in August from its reading in July, at 0.8 per cent, according to figures released yesterday. Though the country has some of the strongest price pressures in the bloc, inflation is still running at less than half the European Central Bank (ECB) two per cent target.
The Spanish government confirmed a second month of deflation yesterday, with prices down by 0.5 per cent in the year to May.
“These low inflation rates make the de-leveraging of the economy costlier and fiscal consolidation more difficult. Furthermore, they mean deflation remains a risk to the recovery,” said Victor Echevarria of BNP Paribas.
Belgium’s measure of inflation also fell yesterday, with no price pressure whatsoever in the year to August. The consumer price index is at its lowest level in five years, adding Belgium to the growing list of Eurozone nations either already experiencing or hovering on the edge of deflation.
“On the whole, with more evidence that the Eurozone recovery is already slowing, the pressure is mounting on the ECB to take further policy action. While it is unlikely that the ECB will act next week, we expect President Draghi to provide further hints that quantitative easing (QE) could be coming before long,” said Sarah Pemberton of Capital Economics.
The ECB’s own data yesterday showed the continuing challenges faced by the central bank: private lending fell by another 1.6 per cent in the year to July, the 27th month in which a decline has been recorded.