European consumer prices dropped more than initially estimated in July as energy costs decreased and rising unemployment prompted households to cut spending.
European consumer prices dropped more than initially estimated in July as energy costs decreased and rising unemployment prompted households to cut spending.
Prices in the 16-member euro region fell by a record 0.7 per cent from the year-earlier month after declining 0.1 per cent in June, the European Union statistics office in Luxembourg said today.
The decline exceeded the 0.6 per cent estimate published on July 31st.
Companies from Carrefour SA to Unilever have offered discounts to encourage consumers to spend just as a 39 per cent drop in oil prices over the past year pushes down inflation.
The European Central Bank on August 6th kept its key interest rate at a record low to support the economy, with President Jean-Claude Trichet saying inflation will turn positive later this year.
“We’re in an environment of continued downward price pressures, given rising unemployment,” said Mario Jung, an economist at BHF Bank in Frankfurt.
“The environment will remain very weak even with an economic recovery. It’s not enough for companies to push through higher prices.”
The core inflation rate, which excludes volatile energy and food costs, eased to 1.3 per cent in July, the lowest in three years, from 1.4 per cent in June.
Energy prices dropped 14.4 per cent in July from a year ago and fell 1.8 per cent from the previous month.
Adding to signs of waning price pressures, European producer prices dropped a record 6.6 per cent in July from a year earlier.
In Germany, Europe’s largest economy, consumer prices posted their first annual drop in more than 22 years in July and wholesale prices plunged a record 10.6 per cent.
Bloomberg