Eurozone chiefs brush off Spain deflation fears
EUROZONE central bankers queued up yesterday to insist that the currency bloc is not being hit by deflation, despite fears over price levels in Spain.
The Mediterranean state posted no change in its consumer price index in February compared to a year earlier, with its central bank governor saying inflation is likely to be limited to 0.4 or 0.5 per cent this year.
“This is one more problem for the recovery,” said Luis Maria Linde.
“The European Central Bank (ECB) aims to keep inflation at around two per cent, and we’re a long way from that right now.”
Yet ECB executive board member Benoit Coeure said there is no euro-wide problem yet. “We don’t see deflation in the Eurozone. We see it as a risk,” Coeure said, adding that the ECB could act if need be.
ECB chief Mario Draghi has been playing down the deflationary threat, saying last week that it should ease as the economy picks up.
And yesterday German finance minister Wolfgang Schaeuble echoed the sentiment, adding that rates are too low from a German perspective.
However, the Eurozone continues to struggle economically, with figures from Brussels revealing a 0.2 per cent drop in industrial output in January.
The Eurostat data, published yesterday, showed a fourth decline in the last six months. Production had fallen 0.4 per cent in the final month of 2013.
Yet IHS Global Insight economist Howard Archer is positive. “The data was primarily dragged down in January by a 2.5 per cent monthly drop in energy output,” Howard said.
“Encouragingly, output of capital goods rose 0.9 per cent month-on-month and 5.8 per cent year-on-year adding to signs that business investment may be starting to improve.”