Euro Area Inflation Set to be Stable at 0.2% for December Last Year

Eurostat figures have revealed that a flash estimate for euro area inflation for December last year was 0.2%, no change when compared to November.

Predictably, low energy prices have been the most significant deflationary influence, as prices fell by 5.9%, although this was less than the reduction of 7.3% that was recorded for November.

Food, alcohol and tobacco prices rose by 1.2% in December, but that was 0.3% less than the previous month.

Services prices were also higher for last month, rising by 1.1%, in a similar fashion to energy, the price rise was not as high as November, where they rose by 1.2%.

Non energy industrial goods remained stable month on month, with price increases remaining on 0.5%.

While the inflation situation has improved from the deflationary figure of -0.2% a year ago, the data will come as a disappointment for the European Central Bank (ECB), who have continued to try and increase the pressure on prices.

Last month, the ECB’s latest attempt to reach their 2% inflation target, included a reduction on the bank deposit rate to 0.3%.

And more significantly, an extension of the EUR 60 billion per month Quantitative Easing (QE) asset purchasing programme, through to March 2017.

Household Spending Confidence Resilient in France

The French National Institute of Statistics and Economic Studies, has disclosed that household confidence remained stable for December last year.

The confidence index stood at the total of 96 for the third successive month, although this is below the long term average of 100.

There was more positive news when respondents were asked about their future vision of their finances, which improved in the survey by three points for December.

As for households’ opinions of their previous financial predicament, the score remained stable at minus 0.l%.

Both of the results remained below the long term average results of the monthly survey.

Opinions on saving capacity remained stable in France, with no change month on month in December, with a tally of +1, which is above the long term average.

More household also thought that inflation had no effect in December, and that prices had not increased when compared to November.

Although more of the participants thought that prices would increase over the next year.

On the overall economic situation in France, the view was that previous living standards in France had declined.

One major worry the survey found was the  increasing fears about employment prospects. Unemployment rates in France are currently 10.8%, and throughout last year stubbornly remained high, being above the EU average of 9.3% of the labour market out of work.

Official figures for the third quarter last year, revealed that France had grown at 0.3%, a leap from the flatlining 0% for the second quarter.

Euro Continues Slide Against the Dollar

The Euro is now buying $1.072, down from $1.084 yesterday morning GMT, as it continues its slide against the greenback since the end of last year.

This is despite the initial robust reaction to the Federal Reserve rate rise in December, attributed to a short squeeze as traders feared heavy losses on the euro.

Analysts at the Bank of America Merrill Lynch have predicted that the euro will soon be worth less than the dollar for the first time in 13 years.

More stimulus from ECB policymakers could be added this year, if inflation figures remain below target, this will renew downward euro pressure.

Against the UK pound, the euro has also fallen in the past 24 hours GMT, spiralling down to £0.732 from £0.736.