Consumer prices in the euro zone rose for the first time in seven months in November, according to figures released today by Eurostat.
Prices rose by 0.6% in the 12 months to November after a 0.1% decline in October. It is welcome news for the economy after analysts feared that the 16-nation euro zone was heading for a sustained period of deflation.
A short period of deflation (where prices fall rather than increase) could be a serious threat to the economy because it deters consumers and businesses from spending in expectation of falling prices.
Earlier this month, it emerged that the euro zone had exited recession after experiencing positive growth in the third quarter.
Commenting on today‘s figures, Colin Ellis, European economist at Daiwa Securities, said: “This confirms that the euro area’s flirtation with deflation has only been short-lived.”
“Inflation is set to rise further in the coming months, with energy prices acting to push up the headline rate,” added Mr Elllis.
The European Central Bank is widely expected to keep interest rates at the historically low level of 1% for the seventh consecutive month when it meets later this week.
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