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Greece Records 11th Consecutive Month of Deflation

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Greece Records 11th Consecutive Month of Deflation

Consumer inflation in Greece remained negative for the eleventh consecutive month, a sign one of Europe’s weakest economies is still struggling to turn the page on recession.

Consumer inflation in January declined at an annual rate of 1.4 percent, official data from Greece’s National Statistics Service showed today. Economists forecast a steeper drop of 1.6 percent, after deflation reached 1.8 percent the prior month.

The data, based on a methodology harmonized across the European Union, show Greece continues to struggle with recovery. The Greek economy contracted 2.6 percent annually in the final three months of the year, the European Commission reported last week. While steep, contraction eased gradually in 2013. Greece’s GDP contracted 5.5 percent annually in the first quarter of 2013.

Meanwhile, growth prospects in the broader Eurozone continued to strengthen, thanks to marked improvements in Germany and France. Eurozone GDP expanded 0.5 percent annually in the fourth quarter, topping estimates. However, weak inflation continues to threaten Eurozone recovery. Consumer inflation in the currency region eased to 0.7 percent in January, fueling speculation the European Central Bank could slash interest rates further to stimulate the economy.

Inflation growth will evade the ECB’s target of 2 percent for the next three years, according to the central bank’s survey of professional forecasters. Inflation is expected to reach 1.1 percent this year. Expectations for 2015 were revised from 1.6 percent to 1.4 percent, while longer-term expectations remained at 1.9 percent.

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