Eurozone inflation set to drop to 2.8 percent

BRUSSELS - Agence France-Presse

Eurozone inflation is expected to drop to 2.8 percent in December, its first fall in four months but still above the level favored by the European Central Bank (ECB), official figures showed yesterday.

Eurostat, the European Union’s statistical agency, said it estimated annual inflation in the 17-nation eurozone at 2.8 percent, compared to 3 percent in November. Inflation in the euro nations hit 3 percent in September, up from 2.5 percent in August, and remained stable through October and November.
The December estimate, if confirmed, will mark the 13th consecutive month that inflation has remained above the ECB’s target for price stability of below or close to 2 percent. However, the estimate could reassure the ECB, which next meets Jan. 12.

Meanwhile, private sector activity in the eurozone shrunk for the fourth consecutive month in December but showed a slight improvement from the previous two months, a key survey showed yesterday.

While output increased in Germany and stabilized in France, it slumped sharply in Italy and Spain, two nations under intense pressure over their high debts, according to the survey compiled by Markit.

The purchasing managers’ index (PMI), a survey of 4,500 manufacturing and services firms, stood at 48.3 points in December - better than a previous estimate of 47.9 points. It had fallen to 47 in November. Any score below 50 indicates contraction.

Despite the December improvement, the overall performance in the last three months of 2011 was the worst quarterly score since the second quarter of 2009. The average score for the fourth quarter stood at 47.2 points.