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Eurozone tumbles into deflation

January 7, 2015

The eurozone slipped into deflation as consumer prices fell into negative territory for the first time in over five years. Falling oil prices and weak demand keep weighing the currency union down.

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Euro banknotes and food items
Image: picture-alliance/dpa

Consumer prices in the eurozone dropped by 0.2 percent in December, marking the first regression into negative territory since the 2009 financial crisis, data released by the EU's statistics agency (Eurostat) showed on Wednesday.

The slide was fuelled by weak demand and plummeting oil prices, which are being passed on to consumers at the pump.

The decline was bigger than expected and is the first sign of a much-feared deflation creeping into the 19-member currency union. However, barring energy prices, the inflation rate was the same as in November at 0.6 percent percent.

Investment cuts feared

The figures are likely to increase calls for the European Central Bank to launch a much-debated stimulus program to pump new life into eurozone.

The ECB's inflation target is below but close to 2 percent.

Deflation - When Everything Gets Cheaper!

Deflation is defined by prices falling over a longer period and has the side-effect of paralyzing spending as consumer wait for prices to dip even further.

The demand decrease, in turn, raises the risk of lay-offs and investment cuts.

pad/hg (AP, AFP, dpa)