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Eurozone inflation in surprise Dec dip

Tuesday, January 07 10:34:16

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 today.

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. (Reuters)