Eurozone inflation ‘rises’ to zero percent in October

Although inflation and unemployment data in eurozone reveals improvement compared with September, weak figures leave door open for European Central Bank to further ease monetary policy

Photo by: AP
Photo by: AP

People rush through a shopping street in Duisburg, Germany, January 7, 2015

Eurozone prices were flat year-on-year in October as expected, a first estimate by Eurostat showed on Friday, maintaining pressure on the European Central Bank to further ease monetary policy despite some signs of greater inflationary pressure.

The European Union's statistics office Eurostat estimated that consumer prices in the 19 countries sharing the euro were unchanged this month against levels 12 months earlier, after falling 0.1 percent year-on-year in September.

Separately, Eurostat said unemployment in the eurozone fell to 10.8 percent of the workforce in September from a downwardly revised 10.9 percent in August.

"The marked drop in eurozone unemployment in September together with flat inflation in October should be supportive to consumer spending, which will hopefully allow it to play a key role in sustaining the euro zone’s modest cyclical upturn," said IHS Global Insight economist Howard Archer.

The main factor that kept the overall price index from rising was energy, the cost of which was 8.7 percent lower this month than a year ago. Unprocessed food was 3.0 percent more expensive.

Without these two volatile elements, the inflation measure that the ECB calls core inflation, was 0.9 percent in October, up from a downwardly revised 0.8 percent in September.

To gauge core inflation, some economists also look at the same measure as the ECB, but they also exclude prices of alcohol and tobacco. This also rose to 1.0 percent year-on-year in October from 0.9 percent in September.

The ECB wants to keep inflation below, but close to 2 percent over the medium term and launched in March a government bond buying program to flood the eurozone economy with cash and in this way accelerate price growth, now stifled by the weak economic growth and very cheap energy.

Concerned that its bond buying plan may not be bringing the desired effects quickly enough, the ECB has signaled it might unveil new stimulus measures at its December meeting.