The inflation rate in the euro area remained in negative territory, as the harmonized index of consumer price (HICP) dropped by 0.3 percent year-on-year in October, the European Union (EU)’s statistical office Eurostat confirmed on Wednesday, in line with its flash estimate released late October.
It was the third month in a row when negative inflation rates were reported in the 19-member bloc, although the condition of too-low inflation did not worsen in October compared with September.
The major contribution to the inflation rate came from food, alcohol and tobacco, followed by services, non-energy industrial goods and energy, according to Eurostat.
A total of 11 countries in the euro area have seen negative inflation in October, among which the annual inflation rate in Germany decreased to minus 0.5 percent.
“The impact of the pandemic is now likely to continue to weigh on economic activity well into 2021,” President of the European Central Bank (ECB) Christine Lagarde said at the ECB Forum on Central Banking last week.
Lagarde noted that demand weakness and economic slack are weighing on euro area inflation, which is expected to remain in negative territory for longer than previously thought.
The resurgence in coronavirus infections as well as the intensification of containment measures, notably a new round of lockdowns in several countries, are dampening prospects of the eurozone recovery.
Isabel Schnabel, member of the Executive Board of the ECB, said recently the effects of a second round of lockdowns are likely to be less pronounced, as they are more targeted.
“It is a hard blow to the services sector, but manufacturing is not being shut down and is benefiting from China’s strong recovery,” said Schnabel.