Saturday 25 February 2017

Consumer prices buck trend with 3.9pc fall

Brendan Keenan

Brendan Keenan

IRELAND was one of only three countries in the 30-nation OECD area where prices fell in January, latest figures from the Paris-based think tank show.

The 3.9pc fall in Irish consumer prices was more than twice the next largest deflation, in Japan, where prices fell 1.3pc. Prices in Finland dropped 0.2pc.

Figures yesterday showed euro-area European inflation slowed in February, falling back to 0.9pc from the 1pc annual rate recorded in January.

Producer price deflation slowed in January. The 1pc drop from a year earlier was the smallest decline in a year, according to the data from the EU, the statistics office said in a separate report.

"Wage costs are probably coming down and there's a lot of slack in the economy; companies don't have much pricing power," Nick Kounis, chief European economist at Fortis Bank in Amsterdam told Bloomberg.

"The outlook is for low inflation, well below the ECB's price-stability goal," he added.

Gabriel Stein at Lombard Street Research in London said that the 0.9pc inflation seemed to be a surprisingly high number.

"The number is likely to be revised down, and euro-area inflation is more likely to surprise on the downside than on the upside in 2010," he said.

The OECD figures show inflation averaging 2.1pc in the 30 member states.

The highest rates recorded were 8.2pc in Turkey and 6.6pc in Iceland, where the currency collapsed after the financial crash.

Britain's inflation rate of 3.5pc was the highest in the EU-15 groups of countries.

Lombard Street's Charles Dumas said that "sadly" the logical conclusion of Britain's position was that a sterling crisis, with another 10pc off the trade-weighted index, forcing budget austerity would be the only route to the "least bad" policy mix.

Irish Independent

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