French economy remains mired in deflation

French economy remains mired in deflation
The French economy remains mired in deflation. Photo: AFP
The French economy remains stuck in deflation, new figures revealed on Thursday as the European Central Bank launched a major anti-deflation programme.

The French economy, the second largest in the eurozone, remained stuck in deflation in February, according to official figures published Thursday, as the European Central Bank launched an anti-deflation programme.

Consumer rices declined by 0.3 percent in February compared to the same period last year, the national statistics office said in a statement.

This followed a 0.4-percent decline in annualised prices in January, the first time in five years that the French economy had slipped into deflation.

The pattern of falling prices is making life difficult for the Frankfurt-based ECB, which aims to keep inflation "close to, but below" two percent.

Earlier this week, the ECB set out its huge bond-buying programme, an audacious and controversial scheme to ward off deflation and stimulate growth in the eurozone.

Falling prices sounds like it should be positive for consumers and the economy.

But economists fear deflation almost as much as rampant inflation because shoppers tend to put off purchases in the belief they may be cheaper in the future.

This leads to a spiral of ever weaker demand, slowing the economy and pushing up unemployment.


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