Eurozone inflation slips back again in December

BRUSSELS (AFP) - Eurozone inflation slipped to 0.8 per cent in December from 0.9 per cent in November, official figures showed on Tuesday.

In December 2012, inflation in the 17-member eurozone ran at 2.2 per cent but it fell steadily, hitting a four-year low of 0.7 per cent in October against a background of concern that deflation was on the prowl.

The Eurostat statistics agency said the largest gains in December prices were seen in food, alcoholic drinks and tobacco which rose 1.8 per cent after an increase of 1.6 per cent in November.

Energy prices were flat after falling 1.1 per cent in November while services were up 1.0 per cent compared with 1.4 per cent.

The figures may stoke fresh concerns the single currency bloc faces a risk of falling prices although other recent data suggests the economy has got through the soft spot it hit in October and November.

Tough government austerity policies to combat the debt crisis have sucked demand out of the economy, pushing inflation well below the European Central Bank's target of close to 2.0 per cent.

This has driven fears of deflation - falling prices in real terms - which can encourage consumers to put off buying goods in the expectation that if they wait, they will become cheaper.

That in turn weakens the economy as companies reduce output accordingly, hitting employment and demand, thereby setting off a downward spiral.

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