Page last updated at 12:52 GMT, Monday, 30 November 2009

Eurozone inflation turns positive after 7 months

Euro symbol
The eurozone has seen five months of falling prices this year

The eurozone has seen consumer prices rise for the first time in seven months, official figures have shown.

Prices rose by 0.6% in the 12 months to November, the European Union's Eurostat agency said.

That marks a turnaround after five straight months of falling prices in the 16 countries that use the euro.

A positive inflation figure was widely expected by economists, following the eurozone's emergence from recession earlier this month.

Deflation fears

The news came as a relief to analysts fearful that the eurozone was heading for a sustained period of deflation - or falling prices.

Deflation is bad for an economy because consumers put off buying goods as they wait for prices to fall further - which can lead to a vicious circle of decreased spending and increased unemployment.

"This confirms that the euro area's flirtation with deflation has only been short-lived," said Colin Ellis, European economist at Daiwa Securities.

"Inflation is set to rise further in the coming months, with energy prices acting to push up the headline rate."

Despite the recent rise, economists widely expect inflation to remain below the European Central Bank's target of just below 2%.

The central bank is expected to give more detailed forecasts on growth and inflation at its latest governing council meeting next week.

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