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updated: 8/29/2014 8:37 AM

Worrying eurozone inflation sags again to 0.3 pct

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  • People walk with shopping bags in Hamburg, Germany. Inflation has fallen to an annual 0.3 percent in August for the 18 countries that use the euro, underlining the shakiness of the continent's economic recovery.

      People walk with shopping bags in Hamburg, Germany. Inflation has fallen to an annual 0.3 percent in August for the 18 countries that use the euro, underlining the shakiness of the continent's economic recovery.
    Associated Press

 
Associated Press

FRANKFURT, Germany -- Inflation has fallen to an annual 0.3 percent in August for the 18 countries that use the euro, underlining the shakiness of the continent's economic recovery.

Eurostat, the EU statistics agency, said Friday the figure is down from 0.4 percent in July, as expected by market analysts. Core inflation, which excludes volatile food and energy, sent a modestly brighter signal as it rose to 0.9 percent from 0.8 percent.

The eurozone economy showed no growth in the second quarter as fears about the Ukrainian crisis weighed on consumers and investment decisions.

The European Central Bank has warned that inflation expectations are worsening and says it will add more stimulus if needed. Many analysts are predicting the bank will launch large-scale purchases of financial assets to pump more money into the economy.

Inflation has been consistently below the ECB's goal of just under 2 percent. That has raised fears that the eurozone may fall into deflation, a crippling downward price spiral that can be difficult to get out of.

Europe's economy grew for four quarters but then the recovery came to a halt in the second quarter of this year as core economies France and Germany stalled. Most economists predict growth will resume but it is feared that uncertainty over the crises in Ukraine and the Middle East will keep the recovery too weak to reduce high unemployment.

Eurozone unemployment remained unchanged in July at 11.5 percent. It is much higher in countries hardest hit by Europe's debt crisis. Spain has an unemployment rate of 24.5 percent, although it fell from 26.2 percent compared to a year ago.

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