Euro zone consumer prices fell by a record amount in January, while economic sentiment worsened further in February, data showed today.
In a report that raised fresh doubts over the strength of the bloc's economic growth, Eurostat said consumer prices in the 12-nation single currency area plunged 0.6 per cent in January, the largest monthly drop ever.
January inflation was revised down to an annual rate of 1.9 per cent from an initial estimate of 2.1 per cent, below the European Central Bank's 2 per cent ceiling.
In December, the 12-nation currency area's inflation rate was 2.4 per cent year-on-year. The European Commission's indicator for economic sentiment in the euro zone fell to 98.8 in February from a revised 100.8 in January, below expectations of 100.4. The index is now below its long-term average.
The figures fueled further concern over the health of growth in the euro zone, where gross domestic product expanded a mere 0.2 per cent in the fourth quarter of 2004.
It also reinforced expectations that the ECB would leave its main interest rate unchanged at 2 per cent for many more months, especially now that the annual inflation rate is now below the bank's target.
Euro zone growth is stifled by weak domestic demand, caused partly by a high unemployment rate of nearly 9 per cent, and strong oil prices. The strong euro also harms exports by making the bloc's products more expensive abroad.
Euro zone inflation was dragged down especially by France, where prices fell 0.6 per cent, the biggest monthly drop since the 1960s.
The economic sentiment indicator has been on a descending path since November, 2004, after a strong increase between March 2003 and September 2004. The consumer index remained unchanged at minus 13, in line with expectations.
Eurostat said although Germany, Spain and Italy showed a sharp decline in economic sentiment, non-euro zone members Britain and Poland registered a strong improvement. In EU newcomer Poland, the indicator reached its highest level ever.