October 2, 2020
BRUSSELS (Reuters) – Euro zone inflation dropped to its lowest level in over four years, falling deeper into negative territory than expected in September and stoking concerns of a deflationary spiral from the COVID-19 pandemic.
Consumer prices in the 19 countries sharing the euro fell by 0.3% year-on-year in September, as well as rising 0.1% month-on-month, the European Union’s statistics office Eurostat said in a flash estimate.
Economists polled by Reuters had expected a 0.2% year-on-year decline. The drop was the steepest since April 2016, when inflation was also -0.3%.
Energy prices tumbled 8.2% year-on-year in September after a 7.8% fall in August. Prices of non-energy industrial goods also fell, by 0.3% after a 0.1% decline in August.
Without the volatile energy and also often changing unprocessed food prices – what the European Central Bank calls core inflation – were up 0.4% from a year earlier.
Economists polled by Reuters had expected a higher 0.8% year-on-year gain.
An even narrower measure excluding also alcohol and tobacco prices that market economists watch closely was up 0.2% year-on-year, less than half of what analysts had expected.
The ECB wants to keep inflation below, but close to 2% over the medium term.
(Reporting by Philip Blenkinsop)