France is sliding into a deflationary vortex as manufacturers slash prices to keep market share, intensifying pressure on the European Central Bank to take drastic action before it is too late, reports The Telegraph.
The French statistics agency INSEE said core inflation fell to -0.2pc in November from a year earlier, the first time it has turned negative since modern data began.
The measure strips out energy costs and is designed to “observe deeper trends” in the economy. The price goes far beyond falling oil costs and is the clearest evidence to date that the eurozone’s second biggest economy is succumbing to powerful deflationary forces.
Headline inflation is still 0.3pc but is expected to plummet over the next three months. French broker Natixis said all key measures were likely to be negative by early next year.
Eurostat data show prices have fallen since April in Germany, France, Italy, Spain, Holland, Belgium, Portugal, Greece and the Baltic states, as well as in Poland, Romania and Bulgaria outside the EMU bloc. Marchel Alexandrovich, from Jefferies, said the number of goods in the eurozone’s price basket now falling has reached a record 34pc.
“Eurozone deflation is now inevitable. There is no way around it,” said Andrew Roberts, at RBS. “We think yields on German 10-year Bunds will fall to 0.42pc next year.”
“The ECB is presiding over a deflationary disaster."