Euro Area Inflation Slows

European inflation slowed in February after rising unemployment and a weakening recovery prompted households to scale back spending., Bloomberg 3/2/2010 10:04:55 AM

Consumer prices in the 16-nation euro region rose an estimated 0.9 percent from a year earlier after increasing 1 percent in January, the European Union statistics office in Luxembourg said. Producer prices fell 1 percent in January from a year earlier, the smallest decline in a year, the statistics office said in a separate report.

European companies may find it difficult to pass on higher costs after unemployment held at an 11-year high in January and the economic recovery slowed to a near-halt in the fourth quarter. The European Commission said last week that the euro region may fail to gather strength for most of 2010 and the European Central Bank forecasts subdued” price pressures.

Producer prices rose 0.7 percent from December, when they increased 0.1 percent. Costs of energy in the manufacturing industry declined 1.7 percent in the year.

Inflation will probably average 0.8 percent in the current quarter before accelerating to 1.3 percent in the three months through June, the commission forecast on Feb. 25. Gross domestic product may rise just 0.2 percent in both quarters, it said.

The statistics office will release a breakdown of February inflation on March 16.

Euro Area Inflation Slows