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Mar 31, 2015 5:52 AM

Eurozone deflation eases as oil prices appear to bottom out

The Associated Press

LONDON (AP) The 19-country eurozone isn't going to be the driving force of the global economy anytime soon, but it's increasingly evident that its numbers are heading the right way.

Official figures Tuesday raised hopes that the current bout of deflation across the region could be over much sooner than anticipated while unemployment has fallen to a near three-year low.

Eurostat said consumer prices across the single-currency zone fell by only 0.1 percent in the year to March following a 0.3 percent fall the previous month. The modest decline was in line with market expectations and follows an apparent easing in the downward pressure emanating from energy costs. In recent weeks, there have been growing signs that the slide in oil prices, which took root last summer, has come to an end.

Eurozone inflation rates have been negative since last December, a headache that prompted the European Central Bank earlier this year to launch a 1.1 trillion-euro ($1.2 trillion) government bond-buying program on the lines of that pursued by the U.S. Federal Reserve for many years.

The hope behind the stimulus, which is set to last until September next year, is to shore up the economic recovery and get inflation back into the system the ECB looks to achieve inflation of just below 2 percent.

"Although the eurozone inflation rate remains negative it surely isn't going to be long before it breaks through into positive territory following the recent strong data from Germany and Spain," said Dennis de Jong, managing director at UFX.com.

Negative inflation rates since December stoked fears that the eurozone would suffer a debilitating bout of deflation, where sustained falls in prices weigh on economic activity, as in Japan in the recent past. Falling prices over a long period of time can prompt consumers to delay spending in hopes of bargains down the line and make businesses reluctant to invest and innovate.

Sometimes, falling prices can be a boon. The recent run of upbeat economic data coming from many parts of the eurozone has been largely credited to the impact of lower fuel costs the 20 euros saved filling up a car can be spent elsewhere.

One of the main offshoots of potentially higher economic growth rates is lower unemployment and separate Eurostat figures Tuesday showed the number of jobless in the eurozone down at 11.3 percent in February from 11.4 percent the previous month. February's rate was the lowest since May 2012.


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