Later this week, the euro zone will release its first estimate of inflation for February. Low and falling inflation is a big worry for policymakers, who hope to avoid the euro zone slipping into a Japanese-style deflationary spiral. The country-level inflation details that have been trickling out in recent weeks are not encouraging.
Take France. It reported annual inflation of 0.7% last week, but so-called core inflation, which strips out goods with volatile prices, gained only 0.1% in the month of January.
In the details, the most eye-catching result was the 15.4% month-on-month plunge in clothing prices. This isn’t a complete surprise, given that it came during one of the twice-yearly sales periods in France’s tightly regulated retail sector. But clothing prices were also down 4% year-over-year, making the latest winter sales much more aggressive than in previous years.
Tepid Christmas trading, which continued into the start of sales…
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