Eurozone Inflation Sinks to October 2009 Level

In May, the International Monetary Fund saw only a 25% chance of the eurozone slipping into deflation by 2015.

But lower-than-expected eurozone inflation has the financial media talking about renewed deflation fears.

In July, eurozone inflation slipped to the level of October 2009.

Initial figures show that inflation in the European Union rose only by 0.4%. The expectations in a Reuters poll was 0.5%.

A July 31, CNBC article notes:

Energy prices were the biggest drag on the figures ... with the cost of food, alcohol and tobacco also slipping in July.

The head of a eurozone firm offered his view on the Continent's economy:

Mario Greco, CEO of Italian insurance company Generali, told CNBC ... that the euro zone is "probably" already in state of deflation.

"The European situation is quite concerning," he said. "I mean the labor situation in all of Europe, you know, is not moving. It's not moving good at all."

Here's another article excerpt:

The European Central Bank (ECB) sees inflation as a key metric in gauging the state of the euro zone, and announced a slew of measures back in June to try to spur on the region's flagging economy. Many analysts fear deflation could lead to a downward spiral, with consumers holding off on purchases in the expectation that prices could fall further. ...

Some have accused the ECB of acting too late to tackle the risk of deflation, with most of its stimulus measures not expected to kick in until later this year and little chance of the central bank announcing new measures in the meantime.

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