Europe's Deflation Threat Eases

        Consumer prices across the European Union fell again in February, but at a slower rate, a sign that the threat of a slide into deflation is easing as central banks rush to launch new stimulus measures.
        Separate data released earlier this month showed that consumer prices in the eurozone, comprising 19 countries that use the euro as their currency, also fell at a slower pace.
        Eurostat on Tuesday said consumer prices in the 28-nation bloc fell 0.2% in February from a year earlier, and confirmed data that showed prices in the eurozone were 0.3% lower. In January, prices fell by 0.5% in the EU as a whole, and by 0.6% in the eurozone.
        Twenty EU members experienced an annual decline in consumer prices in February, down from 23 in January.
        In another sign that deflationary pressures may be easing, the core rate of inflation in the eurozone picked up to 0.7% from 0.6% in January. Eurostat initially estimated that it was unchanged. The core rate excludes prices of items such as food and energy over which central bank policies have little influence, and which are largely determined by global forces.
        The decline in prices in the 12 months to February was largely due to a drop in energy costs, although that eased markedly. In the eurozone, energy prices rose 1.6% from January.
        Europe is an importer of energy, and economists often compare a fall in prices of oil and natural gas to a tax cut, in that it leaves consumers with more money to spend on other goods and services, many of which are produced within the bloc.
        That support to consumer spending helped ensure that across the EU, economic growth accelerated slightly in the final three months of last year, to 0.4% from 0.3% in the third quarter.
        However, those rates of growth are too modest to enable a rapid reduction in unemployment from the very high levels that have persisted since the financial crisis of 2008. Eurostat said Tuesday the number of people in employment rose by just 0.1% in the fourth quarter of 2014, a slowdown from the 0.2% rate of growth recorded in the three months to September.
        Across the wider EU, employment growth also slowed, to 0.2% from 0.3%.
        Economists and central bankers worry that if households and businesses become accustomed to falling prices, they will cut back on spending, lowering output and employment and pushing prices even lower.
        The decline in prices across the continent as 2015 began means there is a risk that Europe may slide into such a deflationary spiral, although most central bankers say that is unlikely.
        To minimize the risk of deflation, central bankers are providing more stimulus, adopting a range of unconventional measures in an effort to boost prices. The ECB on March 9 embarked on a program known as quantitative easing under which it will buy more than one trillion euros of mostly government bonds by September 2016. On March 4, Poland's central bank slashed its main interest rate by 50 basis points to 1.50%, the lowest on record, in response to persistent declines in consumer prices. The central banks of Sweden and Denmark have also eased policy this year.
        Write to Paul Hannon at paul.hannon@wsj.com
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        (END) Dow Jones Newswires

        March 17, 2015 06:40 ET (10:40 GMT)

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