The eurozone remained in deflation in May, according to the latest numbers released by Eurostat on Thursday morning.
Eurostat’s latest data showed that consumer prices in the single currency area fell by 0.1% in May.
Economists had expected inflation to fall by that amount, but it is a small increase from the 0.2% fall in inflation seen in April.
The number means that prices continued to fall for a third straight month, and are absolutely nowhere near the European Central Bank’s official target of close to 2%.
On a year-to-year basis core consumer prices grew by 0.8%, against a forecast of 0.8%, and a previous reading of the same number.
Core prices are an important measure because they strip out the most volatile items — things like fuel and food prices, which are subject to massive variations.
On a country-by-country basis, Romania saw prices shrink the most, falling 3%, while Belgium had the highest inflation, 1.6%. Here is an extract from Eurostat’s release accompanying the data:
In May 2016, negative annual rates were observed in sixteen Member States. The lowest annual rates were registered in Romania (-3.0%), Bulgaria (-2.5%) and Cyprus (-1.9%). The highest annual rates were recorded in Belgium (1.6%), Malta (1.0%) and Sweden (0.8%). Compared with April 2016, annual inflation fell in nine Member States, remained stable in eight and rose in eleven.
And here is Eurostat’s breakdown of inflation on a country-to-country basis:
The eurozone has been flirting with price deflation for the past year or so, largely hovering just above zero since early 2015. However, it has now been depressed below zero for three consecutive months, which is a worrying sign for the ECB.
Thursday’s eurozone CPI figures are the fourth set to be released since European Central Bank and its president Mario Draghi announced a series of new monetary policy measures, including cutting all its base rates, and extending its programme of bond buying. It is also the first data set on inflation since the ECB began its much vaunted corporate bond buying programme.
The measures are designed to try and boost stalling inflation, as well as growth, within the eurozone. So far the ECB’s negative interest rate policy (NIRP) has not managed to stimulate inflation, although Draghi has repeatedly said that he and other senior bank officials are convinced the measures are working.
Despite those assurances, investors in the continent are starting to get tetchy, with Deutsche Bank recently warning that the ECB’s current monetary policies are effectively putting the existence of the European project in jeopardy. Thursday’s figure are likely to provide more ammo for those arguing that the ECB is running out of options when it comes to stimulating growth.