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Euro-Area Inflation Holds at Less Than Half ECB Ceiling

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Dec. 17 (Bloomberg) -- Deflationary forces picked up in the euro area last month as clothing prices fell, according to an analysis by Jefferies International Ltd.

Of the basket of goods used by the European Commission’s statistics arm to estimate inflation, 24.7 percent dropped in price, said London-based economist Marchel Alexandrovich. That was more than October’s 20.9 percent and the most since 2010.

Inflation in the euro area was 0.9 percent in November, close to a four-year low. The risk for the European Central Bank is that deflationary pressures become more pervasive, dragging price growth away from its projected 1.1 percent next year.

“If the ECB thinks inflation is slipping from its forecast then it will become a concern,” Alexandrovich said in an interview.

The share of the consumer price index basket in which prices are falling faster than 1 percent also rose to 45 percent, close to 2010’s record of about 50, he said. Greece and Portugal remain deep in deflation.

To contact the reporter on this story: Simon Kennedy in London at skennedy4@bloomberg.net

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

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