Euro area inflation falls to lowest level in two years as GDP shrinks

investmentweek.co.uk:

The economy of the euro zone shrank by 0.1% in the third quarter, as per initial calculations, falling short of the expected consensus that the GDP would remain stable compared to the previous quarter.

A flash estimate from Eurostat, the statistical office of the European Union, put annualised euro area inflation at 2.9% in October, down from 4.3% in September.

Lower energy prices helped drag down the reading, falling at an annualised rate of 11.1% in October, compared with a fall of 4.6% in September.

Food, alcohol and tobacco were expected to have contributed most to the inflation in October, at 7.5%, compared with 8.8% the previous month.

ECB meets expectations as rates held at 4%

This was followed by services, which saw annualised prices rise by 4.6%, compared with 4.7% in September, and non-energy industrial goods, where prices rose 3.5% in October, compared with 4.1% in September.

Mathieu Savary, chief European strategist at BCA Research, said the reading for Eurozone inflation was «below expectations».

«The deceleration is strong and supported by various factors such as advantageous base effects, slowing wages, muted inflationary pressures and tame inflation expectations for next year,» he said. 

But while it will make the ECB «comfortable», Savary said it is still «too early to bet on an imminent rate cut».

Meanwhile, the economy of the euro zone shrank by 0.1% in the third quarter, as per initial calculations, falling short of the expected consensus that the GDP would remain stable compared to the previous quarter.

«While one quarter does not make a trend, high-frequency indicators suggest that this is the start of a recession. At just -0.1%, it looks as if it is a mild one, at least for now, though with