Euro-Area Inflation Rate Fell to 2.5% in October on Energy Costs

Euro-area inflation slowed in Ocotober as energy costs moderated and austerity measures to tackle budget deficits hurt household spending and investment.

The annual inflation rate in the 17-nation currency bloc fell to 2.5 percent, in line with a first estimate on Oct. 31, from 2.6 percent in September, the European Union’s statistics office in Luxembourg said today. In the month, prices rose 0.2 percent.

The European Central Bank left its benchmark interest rate unchanged at 0.75 percent on Nov. 8 after ECB President Mario Draghi said inflation risks are “very low” and the debt crisis is starting to hurt Germany, Europe’s largest economy.

“There is a general downward trend of core inflation as the recession should spread to most countries by the end of the year,” Dominique Barbet, an economist at BNP Paribas in Paris, said by telephone. “Beyond the decline in energy prices, what we are seeing is basically a low level of demand and production as well as moderation in wage increases.”

The core inflation rate, excluding volatile costs such as energy, alcohol and tobacco, held at 1.5 percent in October. Energy costs rose 8 percent, after a 9.1 percent increase in September.

Vodafone Group Plc (VOD), the world’s second-largest mobile-phone company, said this week that it had a loss in the first half as it missed service revenue estimates and took a 5.9 billion-pound ($9.4 billion) writedown in Spain and Italy.

Industrial production in the euro zone fell 2.5 percent in September from a month earlier, the sharpest drop since January 2009, data showed yesterday. Schneider Electric SA (SU), the world’s biggest maker of low and medium-voltage equipment, cut its target for 2012 revenue on Oct. 25.

To contact the reporter on this story: Angeline Benoit in Madrid at abenoit4@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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