Europe News

Euro zone deflation eases as region awaits QE

Deflation eased in the euro zone in February, according to official data Monday, as the 19-country region awaits the European Central Bank's (ECB) quantitative easing (QE) program.

Prices fell 0.3 percent year-on-year in February, flash estimates from Europe's statistics agency Eurostat showed, above forecasts of a decline to minus 0.4 percent.

A poster advertises "Up To 50% discount" in Rome, Italy
Alessia Pierdomenico | Bloomberg | Getty Images

Deflation hit the euro zone for the first time since 2009 in December, as prices fell 0.2 percent year-on-year. In January, data showed prices had fallen 0.6 percent on an annual basis.

The data come as the ECB prepares to launch a 1 trillion euro ($1.1 trillion) quantitative easing program in an effort to boost the euro zone economy. An ECB spokesman told CNBC Monday that there was no formal start date, but the program was expected to start sometime in March.

Although the fall in prices has been attributed in no small part to the decline in global oil prices, which in turn lowers the cost of fuel, there are fears of a so-called deflationary spiral taking hold. This is when falling prices prompt consumers to defer spending in anticipation of further price falls, which has the potential to damage the prospects of an economic recovery in the euro zone.

Separate data from Eurostat, also published Monday, showed that unemployment fell to 11.2 percent in January from 11.4 percent in December.

Adding to the good news, the euro zone's manufacturing purchasing manager's index (PMI) - a closely-watched survey - came in at 51.0 in February, unchanged from January, Markit data showed. A figure over 50 indicates expansion in the sector.