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Euro zone inflation drops unexpectedly in December
January 7, 2014 / 10:11 AM / in 4 years

Euro zone inflation drops unexpectedly in December

* December inflation surprises with drop to 0.8 pct y/y
    * Concerns that euro zone faces deflationary risks
    * Producer prices fall in November but ease decline

    By Martin Santa
    BRUSSELS, Jan 7 (Reuters) - Euro zone inflation fell
surprisingly in December after a small increase in the previous
month, adding to concerns about deflation across the bloc and
the risks to a fragile economic recovery.
    Consumer inflation in the 17 countries sharing the euro
stood at 0.8 percent year-on-year in the last month of 2013,
compared with 0.9 percent in November, data from the EU's
statistics office Eurostat showed on Tuesday. 
    December's reading takes inflation back to near a
four-year-low of 0.7 percent in October. 
    Prices of food, alcohol and tobacco rose by 1.8 percent on
the year in December after 1.6 percent growth in November, while
the volatile price of energy showed no change, following a 1.1
percent drop in the previous month.
    The October drop in inflation was the first fall below 1
percent since February 2010 and prompted the European Central
Bank to cut its key interest rate to a new record low of 0.25
percent in November.
    ECB President Mario Draghi said last week there were no
signs of deflation or an urgent need for another rate cut,
adding that it was vital to avoid a scenario where inflation
gets stuck permanently below one percent and slips into a danger
zone for the economy.
    However, the euro zone is still far from the deflation that
Japan suffered from the early 1990s.
    Eurostat's separate data release showed euro zone industrial
producer prices eased their decline in November to fall by 0.1
percent on the month after a 0.5 percent drop in October,
putting the annual rate at -1.2 percent, compared with a nearly
four-year low of -1.3 percent seen in October.
    The monthly drop was led by a 0.2 percent fall in costs of
intermediate goods while prices of capital, durable, non-durable
goods and energy prices were flat compared with October.
    Changes in producer prices, unless absorbed by retailers,
eventually translate into changes in the consumer price index.
        
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For a TABLE on Dec inflation see:             
For a TABLE on Nov producer prices see:          
For more details: here
For a GRAPHIC see:             link.reuters.com/kuj24s
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 (Reporting by Martin Santa)

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