The prices of goods leaving the eurozone’s factory gates resumed their decline in July, an indication that the currency area won’t soon escape a lengthening period of very low inflation that threatens to undermine its fragile economy.
The European Union’s statistics agency said Tuesday that producer prices fell 0.1% from June, and were down 1.1% from July 2013. Producer prices rose in June, but that is the only month this year in which they have done so.
The renewed decline in the prices of goods leaving eurozone factories suggests consumer prices are unlikely to rise rapidly in coming months. Eurostat on Friday said the annual inflation rate fell to 0.3% in August from 0.4% in July, its lowest level since October 2009 and well below the European Central Bank’s target of just under 2%.
In another worrying development, the number of registered job seekers in Spain rose in August for the first time in six months. Spain’s unemployment rate peaked in the first quarter last year at just below 27%, and has since dropped to 24.5%.
In response to weak growth and very low inflation, ECB officials provided additional stimulus at their June meeting and said more would be available if the eurozone’s economic prospects didn’t improve.
In a speech at the Jackson Hole gathering of central bankers late last month, ECB President Mario Draghi warned of the risks of investors’ falling expectations for consumer-price growth. His remarks were seen as suggesting the ECB is moving closer to large-scale purchases of public and private debt, known as quantitative easing, at a time when the U.S. Federal Reserve is nearing the end of its stimulus program.