Tuesday June 30, 11:34 AM
Eurozone prices fall record 0.1%: EU
BRUSSELS (AFP) - Inflation in the 16 countries using the euro turned negative in June for the first time on record, with prices falling 0.1 percent over 12 months, an official estimate showed on Tuesday.
The data from the Eurostat statistics agency put eurozone inflation at the lowest point on records going back to 1996 and was down from the 0.0 percent that the agency booked in May.
After hitting a record high point of 4.0 percent last June and July, eurozone inflation has fallen sharply as oil and other commodity prices have collapsed in a dire economic downturn.
Most economists had expected that eurozone inflation would dip briefly into negative territory but have ruled out a longer Japanese-like bout of deflation, a pernicious downward spiral in prices.
"While commodity price developments remain the wildcard for the inflation outlook, there are plenty of reasons to believe that the annual decline of 0.1 percent in June is just the beginning of a downward trend," said Daniele Antonucci at consultants Capital Economics.
"At this stage, we expect negative inflation rates for the next six months or so."
The drop in consumer prices puts further pressure on the European Central Bank which tries to keep annual inflation within a comfort zone that it defines as close to but less than 2.0 percent.
"Deflation in June will be no surprise to the ECB, but the bank needs to be on its guard that it does not become established," said economist Howard Archer at consultants IHS Global Insight.
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