European Consumer Prices Decline for Fourth Month

European consumer prices fell for a fourth month in September as energy prices dropped and companies cut jobs and reduced costs to weather the global economic slump.

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 matched an initial estimate released on Sept. 30.

Lower energy costs have helped to push down consumer prices just as companies are reducing spending to survive the worst recession in at least six decades. Job cuts have pushed Europe’s unemployment rate to a 10-year high. European Central Bank President Jean-Claude Trichet said on Oct. 8 that the economy will recover at a gradual pace” with inflation seen turning positive in the coming months.”

Energy prices slid 11 percent in September from a year earlier, according to today’s report, while the transport industry showed a 3.7 percent drop. Housing prices declined 1.6 percent, while food dropped 1.3 percent in the year.

The core inflation rate, which excludes volatile energy and food costs, fell to 1.2 percent in September from 1.3 percent in the previous month, the report showed. That was the lowest since February 2006.

The ECB expects euro-area inflation to average about 0.4 percent this year and around 1.2 percent in 2010. The Frankfurt- based central bank aims to keep inflation just below 2 percent over the medium term.

Companies may gain more leeway to pass on costs with the economy gathering strength. European confidence in the economic outlook increased to a one-year high last month and a gauge of euro-area manufacturing and services industries showed a stronger expansion than initially estimated.

European Consumer Prices Decline for Fourth Month, Bloomberg
10/15/2009 11:37:41 AM