“Combined with the unexpectedly weak Spanish inflation, it looks like euro zone inflation due tomorrow will also be low”, said Ulrich Wortberg, an economist at Helaba bank. European consumers and companies, which rely on energy imports and exports of goods, stand to be among the main beneficiaries of cheap oil and the strong dollar.
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Monthly, export prices went down 0.5 percent in August, reversing a 0.1 percent slight increase in the prior month.
According to Destatis, the weaker inflation rate reflected the continuing sharp fall in energy costs, which fell by 9.3 per cent in September after declining by 7.6 per cent in August.
But it could even turn negative – as we already know that prices in Spain and Germany fell this month.
Unemployment for August was released at the same time, increasing back to a painfully high 11%, from 10.9% in July. The number of people without jobs fell by just 1,000 during the month.
The import price index has been falling since January 2013.
Even Finnish central bank chief Erkki Liikanen, normally considered an inflation hawk, has warned that euro zone growth is at risk from the slowdown in emerging markets and that inflation could fall short of already modest expectations.
Whether the current period of declining prices becomes a more damaging episode of deflation will depend in part on how long it lasts.
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“With the underlying upward pressure on the euro… this status quo might not last all the way through winter, so a few move on QE could very well be in the cards early next year”, UniCredit economist Erik Nielsen said.
