Consumer prices across the European Union fell for the fourth
straight month in March, but at a slower rate, a sign that the
threat of a slide into deflation is easing as central banks
launched new stimulus measures and energy prices steadied.
Data released earlier this month showed that consumer prices in
the eurozone, comprising 19 countries that use the euro as their
currency, also fell at a slower pace.
Eurostat on Friday said consumer prices in the 28-nation bloc
fell 0.1% in March from a year earlier, and confirmed data that
showed prices in the eurozone were also 0.1% lower. In February,
prices fell by 0.3% in the EU as a whole, a figure that was revised
from an earlier estimate of 0.2%.
Twelve EU members experienced an annual decline in consumer
prices in March, down from 20 in February.
The decline in prices in the 12 months to March was largely due
to a drop in energy costs, although that eased markedly. In the
eurozone, energy prices rose 1.7% from February.
There are signs that growth has picked up in the early months of
2015. But while he welcomed signs that a recently launched stimulus
program is aiding the eurozone economy's recovery, European Central
Bank President Mario Draghi on Wednesday stressed the need to
complete the full course of over EUR1 trillion ($1.1 trillion) in
bond purchases by September 2016 if inflation is to return to a
target of just under 2%.
Analysts surveyed by the ECB expect inflation to reach lower
levels this year than they had previously forecast, before
gradually picking up in response to ECB policy measures and
exchange rate moves.
The ECB's Survey of Professional of Forecasters, a quarterly
poll of analysts not representing the views of ECB staff, said that
inflation in the 19-country currency bloc would only be 0.1% this
year, a reduction of 0.2 percentage point compared with the
forecast made in January.
Inflation, however, is due to pick up more speed in future
years, the forecasters said. They now see inflation next year at
1.2%, compared with the 1.1% expected in January, while for 2017
they forecast an inflation rate of 1.6%, compared with a previous
projection of 1.5%.
With unemployment still high and wages rising slowly, underlying
pressures on prices remain weak, with the core rate of inflation in
the eurozone--which excludes energy and food costs--falling to 0.6%
from 0.7% in February.
Economists and central bankers worry that if households and
businesses become accustomed to falling prices, they will cut back
on spending, lowering output and employment and pushing prices even
lower.
The decline in prices across the continent as 2015 began means
there is a risk that Europe may slide into such a deflationary
spiral, although most central bankers say that is unlikely.
To minimize the risk of deflation, central bankers have provided
more stimulus, adopting a range of unconventional measures in an
effort to boost prices. Some have signaled that they are unlikely
to take any further action, but remain on alert should the fall in
prices accelerate.
Write to Paul Hannon at paul.hannon@wsj.com
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