European Consumer Prices Decline More Than Forecast

Prices in the 16-nation euro region declined 0.3 percent from a year earlier after falling 0.2 percent in August, the European Union statistics office in Luxembourg said . The September drop was the fourth straight decrease and exceeded the 0.2 percent fall projected by economists.

Crude-oil prices have declined 33 percent in the past year during the deepest global recession since the Great Depression, dragging down inflation rates around the world. Even as evidence mounts that the worst of the crisis is over with the euro area’s two largest economies returning to growth, European households expect prices to decline further, a report from the European Commission showed yesterday.

The ECB, which aims to keep inflation just under 2 percent, expects price growth to average about 0.4 percent this year and 1.2 percent in 2010, up from 0.3 percent and 1 percent forecast in June. ECB President Jean-Claude Trichet said on Sept. 3 that inflation would turn positive again within the coming months.” The central bank has cut its benchmark rate to a record low of 1 percent and started buying covered bonds to stimulate lending.

As an increase in euro-area unemployment to a decade-high of 9.5 percent curbs consumer spending, European businesses are cutting prices. Carrefour SA, Europe’s largest retailer, said on Aug. 28 that it will invest 600 million euros ($877 million) in discounts to revive its sales performance.

The inflation report released today is an estimate. The statistics office will publish a detailed breakdown of the consumer-price data, including core inflation, on Oct. 15.

European Consumer Prices Decline More Than Forecast, Bloomberg
9/30/2009 9:50:02 AM