The Big Chill returns of Italy and Europe: it is deflation – The Republic

MILAN – Italy and Europe back into deflation in February, making new mount pressure on the shoulders of Mario Draghi: The European Central Bank meet on March 10 to the light of these data – although preliminary – that show how the Old continent is moving away from the objective of the ECB to bring prices closer to + 2%. The directions of February, however, are very different. According to Istat, after nine months Italy is back in deflation with a price variation of -0.2% MoM and -0.3% YoY. The beautiful country shares the fate of the Eurozone: according to Eurostat’s flash estimate, the inflation rate in the region with the single currency is down 0.2% monthly in February, compared to + 0.3% in January, and of -0.3% per year.

the problem of deflation. in a deflationary situation, the money acquires value: in a nutshell what yesterday you could buy with a euro becomes affordable for a few cents less. For the portfolio of citizens could be good news. But not so for economists. First upstream means that the economy is stagnating. Looking ahead even less: consumers tend to postpone purchases, trusting in further downward price. A confirmation of this trend came from recent data Unimpresa, according to which the reserves deposited by the Italian bank were up a sign that money does not turn into consumption, but savings. Shops and businesses fail as well to dispose of the stocks in the warehouse, slowing production. The only condition to be sold on the market becomes then apply a discount, with the spiral effect of bringing down prices even more, reduce their earnings and reliance that of their workers. Thus the wages stop and they will freeze around the engine of the economy. If then you are highly indebted, as with Italy, the picture is tinged more black: the debt becomes heavier and its reimbursement more complicated.

Prices of February . Much of the slowdown in prices seen recently is due to the collapse in energy prices, with crude which is the minimum for 12 years because of excess production and falling demand. But it is not only the black gold to explain this situation. In its preliminary data, Istat stresses that the “strong” annual decline in February prices is explained by an “economic momentum characterized by the widespread price declines in almost all types of products, which compares with the positive of February 2015 when, in fact, all types of products marked a recovery in prices from the previous month. ” Among the other items falling, Coldiretti reports the 11% of the vegetable prices “which is causing devastating effects in the countryside.” Excluding unprocessed food and energy prices, the so-called core inflation is positive yes (+ 0.5%), but low and slower than the + 0.8% in January.

Other two important baskets for everyday life of the people are now in the red. The “shopping cart”, that is, food prices, for the care of the house and of the person, decreased by 0.1% compared to January and by 0.4% year on year (in January was + 0.3%) . Also decreased the prices of high-frequency products purchase, -0.3% monthly and -0.8% on an annual basis (+ 0.1% in January).

Eurostat and the challenges of Dragons data. As mentioned, even at the level of the euro area it traces the same Italian dynamics. Eurostat certifies a rate of -0.2% in February, compared to + 0.3% in January and + 0.2% in December. The last negative dated back to September of 2015. The figure makes it more likely a new intervention of monetary expansion by the ECB: in Frankfurt expects the updated macroeconomic estimates by the economists of the Eurotower staff. The problem of the governor is that the rate lever has already been extensively activated, bringing the cost of borrowing at historic lows, and for the first time the rate on deposits in negative territory: it means that banks have to pay an implicit tax on the money you parked at the ECB, so that the “invites” to put it into circulation. To this was added the purchasing plan of government bonds by 60 billion per month, which proved equally insufficient to give a real boost to prices. That’s why now everyone expects even more, with new purchases on the launching pad, but they are all aware that monetary policy alone will not be able to dent the problem of deflation.

Topics:

deflation

Italy

europe

inflation

bce

Starring:

mario dragons