Prices fell across the currency bloc by 0.1% year-on-year in September, putting pressure on the European Central Bank (ECB) to beef up the €60bn a month stimulus programme begun earlier this year.
Energy prices acted as the biggest drag on prices after a fall by 8.9% year-on-year in September.
Mario Draghi, the ECB president, hinted recently that more stimulus measures could be needed to boost confidence and growth in the eurozone if there was a further drop in prices. He said the unsettled global economy, which is losing momentum as Chinese growth slows, could lead to a more sustained fall in inflation.
But Eurostat said core inflation remained positive after prices across the service sector rose and so did the cost of food. September inflation excluding energy was unchanged at 1.0%.
Bill Adams, senior international economist at PNC Financial Services Group, said one month’s negative inflation was not enough to spur the ECB to boost its quantitative easing (QE) scheme.
He said: “Despite the year-ago decline in headline inflation, this report does not meet the definition of deflation that Draghi has repeatedly cited this year – a self-perpetuating decline in prices that occurs across a wide range of goods and services.”
A report by the credit ratings agency Standard & Poor’s argued that eurozone growth would likely remain steady despite the diminishing prospects for exports, dampened by the rising value of the euro and a slowdown in China that has spread to emerging markets.
Jean-Michel Six, Standard & Poor’s chief economist for Europe, said: “As emerging market currencies have declined, the euro has begun to appreciate again, complicating the ECB’s QE programme, meant to jumpstart eurozone growth and lift inflation expectations.
“These two weaknesses point to a continuation of QE beyond September 2016, as by then inflation will still be well under the ECB’s target of ‘close to’ 2%.”
This article was written by Phillip Inman Economics correspondent, for theguardian.com on Wednesday 30th September 2015 12.03 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010