Eurozone Price Falls Ease

        By Paul Hannon and Emese Bartha
        Eurozone consumer prices fell for the fourth straight month in March, but at the slowest pace during that period, easing fears that the currency area is at risk of a slide into deflation.
        The European Union's statistics agency Tuesday said consumer prices were 0.1% lower than a year earlier, having fallen 0.3% in February and 0.6% in January.
        Prices began to fall in December, prompting the European Central Bank to launch a program of quantitative easing that will see it buy more than one trillion euros ($1.09 trillion) of mostly government bonds by September 2016.
        ECB policy makers had expected prices to fall throughout the first half of this year and the central bank's economist have forecast that prices will be flat in 2015. The prospect of an earlier-than-expected end to the period of falling prices has already led to speculation in financial markets that the ECB may end its bond purchase before September 2016, or buy smaller amounts of debt.
        But ECB President Mario Draghi last week stressed that the QE program will last for at least 18 months and continue until policy makers are convinced that inflation will stabilize near annual rates of 2%.
        The slowdown in the pace of price falls has largely been due to a modest rebound in energy costs. Energy prices were 5.8% lower than a year earlier in March, having been down 7.9% in February and 9.3% in January.
        However, there was a reminder for policy makers that lower energy costs may lead to slower increases or outright declines in the prices of other goods and services, as the core rate of inflation fell to 0.6% from 0.7% in February.
        Europe is an importer of energy and economists often compare a fall in prices of oil and natural gas to a tax cut, as it leaves consumers with more money to spend on other goods and services, many of which are produced within the bloc.
        Rather than push the eurozone into deflation, lower energy costs appear to have delivered a boost to the currency area's still modest economic recovery, helped by the ECB's stimulus, and the weakening euro.
        Surveys released last week showed private-sector activity increased at the fastest pace in almost four years in March, while a separate survey released Monday showed businesses and consumers became more optimistic about their prospects than at any time since June 2011.
        However, economic growth is likely to remain weak by comparison with other developed economies such as the U.S. and the U.K., and it will therefore take many months before the unemployment rate falls back to pre-crisis levels.
        Eurostat Tuesday said the eurozone's rate of unemployment fell in February to 11.3% from 11.4% in January, although the January figure was revised higher from 11.2%. Eurostat said the number of people without work fell by 49,000 during the month, leaving 18.2 million people without work.
        The decline in the jobless rate looks set to continue. Germany's Labor Agency Tuesday said the seasonally adjusted unemployment rate fell to its lowest level since German reunification in March, reaching 6.4%, after 6.5% in February. The agency said that unemployment declined by 15,000 in adjusted terms in March, which beat the fall of 12,000 expected by economists in a Wall Street Journal survey.
        However, German retail sales fell in line with expectations in February, slightly reversing the solid expansion seen in the previous two months, while the annual reading suggests that consumer spending remains a key pillar of growth in Europe's largest economy.
        In France, consumer spending rose 0.1% on the month and 3.0% on the year in February, both in line with economists' forecasts.
        With growth weak and unemployment high, a fresh decline in energy prices could revive the threat of deflation, and some policy makers will continue to worry that businesses and households will start to postpone spending decisions in the expectation that goods will be cheaper in the future, lowering output and putting further downward pressure on prices.
        Write to Paul Hannon at paul.hannon@wsj.com and Emese Bartha at emese.bartha@wsj.com
        (END) Dow Jones Newswires

        March 31, 2015 05:00 ET (09:00 GMT)

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