Europe in deflation: in January, negative monthly rates

Eurostat issued its report, and the European Commission issued its latest “European Vacancy Monitor” showing growing North-South divide in the EU labour market

It’s official: the European Union and the eurozone are in deflation. As shown by Eurostat, negative monthly rates have been recorded in January: -0.9 percent in the EU-28, -1.1 percent in the EU-18. Italy stands out with a stunning -2.1 percent m/m, the highest in the eurozone; Belgium isn’t much better (-1.9 percent m/m), as well as Spain (-1.8 percent m/m). Other European economies are in deflation too: Germany (-0.7 percent m/m), France (-0.6 percent m/m) and UK (-0.6 percent m/m). Dealing with selected aggregates, all items suffered a decrease in prices (energy, food, alchool, tobacco, seasonal food, non-energy industrial goods). Only the sub-indices of milk, cheese and eggs and electricity registered a slightly increase (we are talking about thousandths, +0.05 percent).

Not a good sign for European economy. The collapse of inflation, with negative rates, shows a crisis of consumption indicating a fall in purchasing power as well as an impoverishment of the society. A deflative data that could be connected to a decrease in the number of hirings, thus of the available income. Eurostat issued its report the very sae day in whih the European Commission issued its latest “European Vacancy Monitor” on vacancy trends in European labour market: overall, recruitment fell by 4 percent in 2013 second quarter in comparison with the same quarter of the previous year. Still, January 2014 data are not available, it would have been interesting to see how much the fall in recruitment affected inflation. Anyway, the report highlights a growing North-South divide, with a shortage of labour supply concentrated in Southern states. Eurostat data on inflation shows these are the countries with the highest negative monthly rates (Italy -2.1 percent, Spain -1.8 percent, Malta -1.5 percent, Portugal -1.4 percent).

Dealing with the shortage of labour supply, the European Commission underlines an effective tool: mobility. “Diverging job prospects in Northern and Southern Europe underline mismatches in the European labour market,” said László Andor, Commissioner for Employment, Social Affairs and Inclusion. “Labour mobility might help to reduce those imbalances,” he added.

 Renato Giannetti