Page last updated at 11:09 GMT, Wednesday, 30 September 2009 12:09 UK

Eurozone prices falling further

Woman speaks on her phone next to currency exchange signs
Inflation has been negative in the eurozone for the past four months

Prices in the eurozone fell in September at a faster rate than they had in August.

The inflation rate fell to -0.3% in the year to September, from -0.2% in the year to August, according to Eurostat.

It is the fourth consecutive month that the rate of inflation has been negative in the bloc of 16 European nations that use the euro as their currency.

Oil prices have fallen over the past month as concerns have grown about the state of the US economy.

'Temporary relapse'

Deflation is considered damaging to an economy because consumers tend to delay making major purchases until prices fall further. Without consumer spending to stimulate growth, economic output falls.

The European Central Bank's target rate for inflation is just below 2%.

Prices had fallen 0.7% in July and 0.1% in June in the first spell of deflation since euro notes and coins were introduced in 2002.

"This is probably a temporary relapse, mainly related to food and energy price base effects," said Martin van Vliet, an economist at ING.

"Headline inflation will likely turn positive again in November and edge up further going into 2010, as the earlier sharp drop in oil and food prices increasingly drops out of the calculation."

Seasonal effects

In other economic news around Europe, German unemployment fell in September, but it was attributed to seasonal and statistical effects rather than any genuine economic strength.

The jobless rate fell to 8% from 8.3% in August, according to the Federal Labour Agency.

A total of 3,346,000 people were registered unemployed in the month, which was 125,000 fewer than in August but up 266,000 from September 2008.

But the labour agency warned that the fall was due to a traditional rise in employment at the end of the summer holidays and also a change made earlier in the year so that people being trained by private job agencies were no longer considered to be unemployed.

It said that under the old rules and using seasonally adjusted figures, unemployment actually rose 10,000 from August.

In the Irish Republic, the number of people claiming unemployment benefit rose by a seasonally adjusted 600 from 428,800 in August to 429,400 in September, according to the Central Statistics Office.

But the unemployment rate rose to 12.6% in September, which was the same as August's revised figure.

Full eurozone unemployment figures are due to be released on Thursday.

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