EUobserver

Sign of Recovery: Euro Zone Prices Rise


Average consumer prices rose across the 16 nations sharing the euro currency in November, a further sign that the area is slowly moving out of recession.

The development brings to an end a seven-month period since April, during which prices had steadily declined.

However the greater-than-expected increase of 0.6 percent, reported in provisional data released on Monday (30 November) by the EU's statistics office, Eurostat, is still significantly below the European Central Bank's target of 'below but close' to two percent.

The rise is seen as a positive development by economists, with consistently falling prices paradoxically considered a deterrent to greater consumption as citizens delay purchases in expectation of further falls.

Analysts were quick to point out that 'core inflation'—a measure of price changes once fuel and food are removed from the calculation—is still on a downward trajectory.

The euro area's struggling economy and continued job losses mean this is unlikely to change in the near future.

"Economic activity is unlikely to be strong enough to generate significant inflationary pressures for some considerable time," said Howard Archer, chief European economist at London-based IHS Global Insight (IHS), reports AFP.

Mr. Archer said domestic factors such as wages "are the main drivers of core inflation".

Forecast rises in euro area unemployment levels next year are likely to push wages down even further, with unemployment already standing at 9.7 percent in September.

Members of the European Central Bank will meet this Thursday but are unlikely to change the current interest rate from its current all-time low of one percent, a figure that is expected to remain for much of next year.

However, the central bank is forecast to end its provision of unlimited one-year liquidity to the region's commercial banks, an exceptional measure brought in following the fall of Lehman Brothers in September 2008.

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