Euro-Zone Producer Price Falls to -0.5%, Raising the Risks for Deflation

Factory outputs in German declined for the fifth consecutive month in January as industrial production plunged 7.5% from the previous month, which was well below expectations for 3.0% contraction, while the annualize rate of production slipped to -19.3%.

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[B]EURUSD[/B] – Factory outputs in German declined for the fifth consecutive month in January as industrial production plunged 7.5% from the previous month, which was well below expectations for 3.0% contraction, while the annualize rate of production slipped to -19.3% from a revised reading of -11.3% in previous month as Europe’s largest economy faces its worst economic slump in over 30 years. Meanwhile, producer prices in the Euro-Zone fell 0.8% in January after sliding 1.5% in the previous month, which lower the annual rate to -0.5% from 1.2%, marking its first drop since 2004. The report showed that energy costs fell 1.5% during the month, which was followed by a 4.1% decline in the previous month, while prices for intermediate goods slipped 1.2% from December. Nevertheless, the ECB’s monthly report stated that the board saw a balance in the economic risks, and said that price growth may temporarily go negative, but went onto say that the inflation outlook for the medium to longer term remains in line with the Governing Council’s mandate to keep the inflation rate close to 2%. Discuss the topic and your trade ideas in the EUR/USD Forum.