Euro zone prices dip in Sept, pulled down by cheaper energy

September 30, 2015

Euro zone prices fell year-on-year in September for the first time in six months, the official estimates showed on Wednesday, highlighting the persistent risk of outright deflation amid a slump in commodities prices.

The European Union’s statistics office Eurostat estimated that consumer prices in the 19 countries sharing the euro fell 0.1 percent year-on-year in September after a 0.1 percent rise in August.

Economists polled by Reuters had expected a reading of no change in prices this month.

The main factor behind the easing was a sharp annual drop in energy prices, which fell 8.9 percent after a 7.2 percent fall in August. Unprocessed food, on the other hand, was the biggest upward driver for the overall index, with a 2.7 percent rise.

Without these two volatile components — or what the European Central Bank calls core inflation — prices increased by 0.9 percent year-on-year in September, the same as in August.

The ECB wants to keep the headline inflation at below, but close to 2 percent over the medium term and started buying assets including government bonds in March to inject more cash into the economy and in this way accelerate price growth.

But the 1 trillion euro plus programme, called quantitative easing (QE), has so far had limited success because of the sharp declines in the prices of commodities, exacerbated by expectations of slower economic growth in the world’s second biggest economy China.

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