Euro Zone Consumer Price Index - Economic Data Preview
The Euro Zone Consumer Price Index is set to show that the annual pace of inflation rose to 1.2% in February from 1.1% in the previous month, the first tick higher since price growth peaked at 4% in July 2008. Indicators measuring business and consumer sentiment extended months of losses to set new all-time lows in the same period, so it seems unlikely that this inflation will be of the benign variety that comes with renewing vigor in economic activity. Rather, rapid depreciation may be the reason for the higher CPI reading. On average, the Euro has fallen 15.1% against the currencies of the regional bloc’s top five import partners, raising the cost of foreign-made goods for consumers on the continent. The implications of this trend could be quite ominous considering the pace of price growth is rising even as the economy sinks deeper into recession, limiting the ability of the European Central Bank stimulate growth through monetary policy for fear of letting inflation skyrocket. Where some countries are worried about deflation (falling prices), it seems the Euro Zone could see stagflation (rising prices and falling output) as a real threat in the near term.
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