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Europe sees inflation at ten-year low

02 March 2009 16:56 (UTC +04:00)

Baku- APA-Economics. Inflation in Europe stayed close to the lowest rate since 1999 in February as the global financial crisis undermined consumer confidence and curtailed spending, Bloomberg reports.

Consumer prices in the euro area rose 1.2 percent, compared with a 1.1 percent increase in January, the European Union statistics office in Luxembourg said today. Economists expected a 1 percent inflation rate in February, according to the median of 32 forecasts in a Bloomberg News survey. The January reading was the lowest since July 1999.

Oil prices have plunged 70 percent from an all-time high last summer as the financial turmoil has curbed global growth and pushed the euro-zone economy into its worst recession since World War II. The European Central Bank has signaled it is ready to cut interest rates to a record low this week to bolster the economy.
All 55 economists surveyed by Bloomberg News predict the ECB to reduce the benchmark rate by 50 basis points, or one-half percentage point, to a record low 1.5 percent at its next meeting on March 5. The central bank already has cut the rate by 2.5 percentage points since early October.

The euro extended losses after the inflation report was published. The European currency traded at $1.2593 at 11:03 a.m. in London, down 0.6 percent.
Inflation in Germany, Europeâ€™s largest economy, and Italy unexpectedly accelerated in February. The German inflation rate rose to 1 percent from 0.9 percent in January, led by rising prices for package vacations and motor fuels, the Federal Statistics Office in Wiesbaden said last week.
Europeâ€™s manufacturing industry shrank at a record pace in February as export orders collapsed and companies scaled back production, Markit Economics said today. A gauge of manufacturing activity declined 33.5 from 34.4 in January, falling more than initially estimated.

The inflation report released today is an estimate. The statistics office will publish a detailed breakdown of the data, including energy-price inflation as well as the core rate, on March 16.