Euro zone inflation plunged more than expected in December. The speed of decline in the inflation rate in the fifteen countries that were then using the euro surprised economists. At the same time the latest prediction was for retail sales in the region down to be down by at least 3.2 percent in December.Inflation was at 1.6 percent, year on year. That is the lowest in 26 months, down from 2.1 percent in November and 3.2 percent in October. But shoppers in a Brussels supermarket told euronews that there was no sign of that. One man said: “No, I haven’t seen any fall in prices, I’m seeing them stay the same, to tell you the truth, but otherwise, I’m not seeing any of these price cuts that I’ve been hearing about.” And a woman shopper said: “I don’t think people will buy more because .. if people don’t earn much money, they won’t spend much.”
The back of end of 2008 saw retail sales fall by 2.1 percent in October, improve a little bit in November when they were down 1.4 percent year on year, but the latest analysts forecast is for a fall of 3.2 to 3.5 percent in December from the previous month.
December’s inflation figure was below the European Central Bank’s target level of just under two percent for the first time since August 2007. As a consequence the euro lost value against the dollar and the pound due to rising expectations of a deep interest rate cut by the ECB next week.