Eurozone falls into deflation in August
By Michele Maatouk
Date: Tuesday 01 Sep 2020
(Sharecast News) - The eurozone fell into deflation in August, with consumer prices down as the Covid-19 pandemic weighed on energy prices, according to preliminary data released by Eurostat.
Consumer prices in the bloc declined by 0.2% year-on-year versus expectations of a 0.2% increase. This marked the first negative reading since May 2016. Energy prices fell 7.8% following an 8.4% slump in July.
Meanwhile, food, alcohol & tobacco prices were up 1.7% compared to a 2% rise in July, and non-energy industrial goods prices dipped 0.1% in August following a 1.6% increase the month before.
The core rate of inflation - which excludes food, energy, alcohol and tobacco - was up 0.4%, down from a 1.2% increase in July.
ING analyst Bert Colijn said the biggest swing in the rate was caused by a reversal in rising industrial goods prices last month, which was a one-off factor due to a change in the start of the sales season in some large eurozone economies.
"These countries - including France and Italy - postponed the start of the sales to give retailers a breather coming out of the lockdown period. Now that sales have started in some of these economies, prices in goods have gone into reverse," he said.
"But there is a more structural element visible in services inflation, which has been dropping since May. The decline from 0.9 to 0.7% in August indicates that lower core inflation is not just noise but that the weak economy is starting to have more of an effect on price growth."
Separate figures from Eurostat showed the unemployment rate in the eurozone ticked a little higher in July, albeit less than expected. The rate came in at 7.9%, up from 7.7% in July but a touch below expectations of 8%.
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: "A significant number of workers remained on furlough at the start of the third quarter, in terms of the headline, it is just as likely that unemployment rose because people returned to the labour market - and was classified as jobseekers - as it is that previously employed or furloughed workers have lost their job.
"In short, these data currently provide a very poor guide to conditions in the EZ labour market, though the direction of travel is clear enough. For the record, we continue to think that euro area joblessness will rise further, but until governments' job-retention support wanes more clearly, it's difficult to know for sure what the state of the EZ labour market is."
Special promo:
Trading the Forex Market? Visit FXmania.com to get advanced infomation about currencies and the Foreign Exchange
Market.
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN