The eurozone’s inflation rate was flat at just 0.4 per cent in July, as Eurostat’s final data confirmed the initial limp flash reading.
However, month-on-month prices fell 0.7 per cent in July, more than expected by economists and adding to concerns over the eurozone’s flirtation with deflation.
The European Central Bank loosened monetary policy further earlier this summer by moving its deposit rate into negative territory and unveiling another lending scheme for eurozone banks.
That has helped the euro weaken significantly from its highs, but inflation has remained extremely subdued in the common currency area.
Data released yesterday indicated that French consumer prices (excluding cigarettes) fell 0.3 per cent in July, and even mighty Germany is seeing little price pressures, with its inflation rate falling to 0.8 per cent in July.
The situation is the most precarious in the eurozone periphery, where zero or negative inflation adds to weight of their debt burden. Portugal’s inflation rate has been negative for most of this year, and fell to minus 0.9 per cent in July.
The currency bloc’s economy also failed to grow at all between April and June, raising fears about an increasingly fragile recovery as it slips further towards deflation.
Eurostat, the European Commission’s statistics bureau, said on Thursday that GDP did not change between the first and second quarter of this year.
The result, which was slightly worse than expected, means that the eurozone’s economy has grown by just 0.9 per cent over the past 12 months, compared with an expansion of 3.1 per cent in the UK and 2.4 per cent in the US
