All the latest economic and financial news, as the eurozone consumer prices index turns negativeSummary: pressure on ECB as inflation hits minus 0.2%Oil to blameWhat the experts sayEarlier:German unemployment at record low, Italy record highBrent falls below $50/barrelGeorge Osborne: Firms must pass savings onto consumers 2.05pm GMT Our economics editor, Larry Elliott, writes that the slide in the oil price should be welcomed, and ought to deliver stronger growth over time:What’s happened in the past six months or so is more of a supply shock. Sure, there has been a slight easing in global demand for crude caused by the slowdown in China and the stagnation in the eurozone. But this has been nothing like as dramatic as the collapse in activity during the winter of 2008-09. Instead, falling oil prices are more to do with over-supply from three big sources. The first has been the expansion of shale production in the US, the big structural change to the market since the financial crisis. The second has been the decision by Saudi Arabia to flood the market with cheap crude, thus forestalling any attempts by Opec to put a floor under the price by limiting output. The third has been increased production from countries – such as Russia – which are trying to protect their oil revenues as prices fall. 1.57pm GMT America’s trade figures should continue to benefit from the fall in the oil price, says Capital Economics’ Paul Dales: The more recent drop in oil prices will soon reduce the trade deficit by a further $5bn or so, to take it to a five-year low of $34bn. 1.48pm GMT The slide in the oil price has helped America narrow its trade gap.The US trade deficit hit an 11-month low of $39bn in November, compared to estimates of $42bn.U.S. trade deficit falls to $39B in November to its lowest level in 11 months: http://t.co/pepWTN0mT8 pic.twitter.com/uadbQ5k2Zb 1.36pm GMT Encouraging news from America -- US private firms created 241,000 new jobs in December, around 15,000 more than expected.November’s private sector payroll figures were also revised higher, to show 227,000 new jobs were created, up from 208,000 previously. 1.24pm GMT Investors continue to push down the value of Greece’s government bonds, ahead of its general election on 25 January.The interest rate, or yield, on Greek 10-year debt has risen to 10.7%, up from 9.6% last night.Bond buyers are preparing for Greece's economy to worsen. MT: @burgessansm Greek 10-Year Bond Yields Exceed 10% http://t.co/eoqQMptnVE#Greece's bonds roiled in the run-up to a Jan25 election, Greek 3yr bonds jumps by 168bps to 15.7% highest since 2012 pic.twitter.com/QzRyM2Pv3Q“We cannot go to a second round of elections,” said the socialist leader addressing the issue of a second vote taking place the following month if Greeks fail to elect a government on January 25. “If we waste February, too, the train will have derailed,” Venizelos told Skai TV insisting that Athens faced an excruciatingly tight deadline to conclude negotiations with creditors and draft a precautionary credit line to replace the bailout funds that formally ended last year. 12.49pm GMT Time for a recap.Pressure on the European Central Bank has intensified after the eurozone’s inflation rate turned negative for the first time since 2009.Europe sinks back into deflation. Ouch. http://t.co/RgF442gn8H pic.twitter.com/rWPDN7lwgO“Today’s figures pile yet more pressure onto the ECB to deliver a sizeable quantitative easing programme at its policy meeting later this month. But it’s too late to head off deflation now,” said “Without a rebound in oil prices, energy effects alone could push the headline inflation rate down towards -1 percent in the early months of this year and keep it in negative territory for most of 2015.”Το πρόβλημα της Ευρωζώνης σε ένα γράφημα... Οικονομία δύο ταχυτήτων pic.twitter.com/SfaPEz6xPd 12.34pm GMT Germany has led the opposition to a full-blown eurozone QE programme, arguing that buying up government bonds with new money would be ineffective and illegal.But Nick Beecroft, senior market analyst at Saxo Capital Markets, reckons the Bundesbank may now cave in at the next ECB meeting: “The news that the estimate for December Eurozone headline inflation fell to -0.2% yoy will surely set the seal on the ECB’s much anticipated introduction of Quantitative Easing and could serve to silence, or at the very least mollify, likely Governing Council dissenters, i.e. the Bundesbank. Very significantly, the descent into deflation was not due only to the recent precipitous decline in energy prices; food, alcohol and tobacco inflation also fell from 0.5% yoy to zero, yoy. 12.17pm GMT Danae Kyriakopoulou, economist at the Centre for Economics and Business Research, also argues that the European Central Bank may feel that the current deflation is the ‘good’ variety.Given that the ECB has for so long resisted QE even while some countries were in “bad” deflation, there may be little hope in expecting action now that deflation has spread to the rest of the bloc due to factors beyond its control. Overall, Cebr would welcome a move to QE but maintains its view that it would be insufficient to kick-start the recovery. A softer take on austerity and the setting of both fiscal and monetary policies in expansionary mode are imperative to avoid another crisis. 11.32am GMT The Wall Street Journal’s Richard Barley is also in the ‘low inflation is good’ camp.Strange days. Investors pay Germany to lend to it and everyone apparently wants the ECB to make oil and food more expensive. 11.31am GMT Back to the eurozone’s lurch into negative inflation (-0.2% in December).Samy Chaar, chief economist at Swiss bank Lombard Odier, argues that Europe is experiencing ‘good’ deflation, thanks to the falling energy prices Though prices contracted by 0.2% in December, core prices (excluding energy, food, alcohol and tobacco) remain stable at 0.8% (slightly increasing by +0.1%). The figures indicating prices fell are skewed because of the low oil price, which means there is slightly less pressure.Nonetheless, this forces the hand of the ECB and the data still makes the case for Draghi to act because of recent signals, market expectations, and the Greek saga. Quantitative easing might stabilise inflation expectations –the key driver of inflation – but the central problem is one of liquidity. 11.15am GMT Ah.... it appears that a false rumour that Saudi Arabia’s King Abdullah had died also pushed up the oil price in the last hour:spurious rumour of #Saudi king passing away cited as reason for move higher in #crude.. Saudi market still up +1.7% so unlikely to be true.. 11.01am GMT Europe’s stock markets are now rallying, on speculation that the ECB will announce a new stimulus programme soon.The FTSE 100, German DAX and French CAC indices are all up around 1.1%. 10.52am GMT There is no improvement in Europe’s jobless crisis. The eurozone unemployment rate was unchanged in November 2014 at 11.5%.As usual, the lowest unemployment rates were recorded in Austria (4.9%) and Germany (5.0%), and the highest in Greece (25.7% for September 2014) and Spain (23.9%). More details here. 10.50am GMT Nick Kounis, economist at ABN Amro, predicts that eurozone inflation will remain negative for several months:We expect headline inflation to remain negative over the next few months. The exact path depends crucially on oil prices. If they were to remain at current levels, inflation would likely remain negative until June of this year. Having said that, core inflation is likely to move sideways. Despite high unemployment, there is little disinflationary pressure coming from the labour market. In addition, import prices (outside of oil) will rise due to the fall in the euro.The Greek issue could complicate the announcement. We expect the ECB to announce that it will embark on a large scale asset purchase programme, including sovereign bonds, at its January meeting. However, it may well hold off from providing any further details until March, giving it a chance to see how the situation in Greece turns out. 10.41am GMT Economists can get into quite a lather arguing about what, exactly, counts as deflation.Back in 2008, ECB board member Lorenzo Bini Smaghi argued that prices would have to be falling for some time before an economy was truly in the grip of deflation (speech here). So you could argue that we’re only seeing disinflation right now......To all the 'deflationists', the usual reminder: deflation, if you can define it, has to be broad-based and protracted http://t.co/Xlue8h9BgF 10.39am GMT The euro is weakening, down 0.33% today to a new nine-year low of $1.1846 against the US dollar. 10.26am GMT Jeremy Cook, chief economist at the international payments company, World First, argues that oil cannot take all the blame for Europe’s slide into negative inflation. The European Central Bank must take some of the blame, he says:“You will only need one guess as to what represents the biggest nail in the European inflationary coffin.“A 6.3% fall in oil price inflation in the year to December has put year-on-year prices into negative territory for the first time since 2009 in the Eurozone. 10.20am GMT Here’s some of the best instant comment on the news that the eurozone inflation rate has turned negative: it may be oil-driven, and oil prices may go back up. but this is still significant. #deflationIf you're a euro hawk and are relying on core inflation of 0.8%, you've already lost the argumentBeautiful. Pro QE camp can use headline inf for their argument, hawks are being served with core inf. Let the fight begin. #ECB #QE #DraghiCore Eurozone inflation has been below 1% in 13 of the last 15 months. This is about more than oil. 10.18am GMT One important point – core inflation across the eurozone rose in December, to +0.8%.Core inflation strips out volatile measures such as food and energy prices, so central bankers see it as a better measure of underlying inflationary pressures. 10.11am GMT The eurozone is officially back in deflation. Consumer Price index fell by 0.2% Y/Y in December 2014: pic.twitter.com/Z6C2UIlBVG 10.11am GMT The drop in eurozone inflation is due to the slump in the oil price -- as this chart from Eurostat shows:Euro area annual inflation down to -0.2% in December 2014 - flash estimate from #Eurostat http://t.co/LvqHgCcf0j pic.twitter.com/TTKnlWvdEx 10.03am GMT If you really want a current 1930s economic analogy the Eurozone is the place to look. 10.02am GMT BREAKING: The eurozone has fallen into deflation.Harmonised consumer prices across the single currency region fell by 0.2% annually in December, according to Eurostat. 9.56am GMT Just a few minutes to go until the eurozone inflation data, and jobless rate, is released.Economists expect to see the consumer prices index fall into negative territory, at minus -0.1% year on year.Due at the top of this hour: Eurozone CPI estimate for Decc, the market expects -0.1% ^KB #FX #EUR 9.47am GMT Michael Fuchs, a senior member of Angela Merkel’s party, has reportedly blamed Italy’s dire unemployment rate on its failure to reform its economy.Here are the newswire snaps:*FUCHS SAYS RECORD ITALY UNEMPLOYMENT IS DUE TO LACK OF REFORMS*FUCHS SAYS `ITALY HAS TO DO ITS HOMEWORK' 9.41am GMT Consumer group uSwitch has urged utility firms to feed the slump in energy prices onto their customers, and criticised the industry for not acting faster.Tom Lyon, uSwitch.com energy expert, says: “It’s only right that consumers should benefit from lower wholesale energy costs. Whilst quick to pass on rising costs, the big six energy suppliers are yet to reduce bills for the majority of their customers who are on standard tariffs.“It’s now high time for one of the big six to cut their standard prices and help hard-pressed households, and lay down the gauntlet to the others to do the same. 9.33am GMT A reminder of the struggle faced by young people in Italy looking for work:Italy Nov Youth Unemployment Rate 43.9% vs 43.3% in Oct pic.twitter.com/YL5bPyySsP 9.30am GMT Brent crude oil has inched back over the $50 per barrel mark, but is still down 1.6% today. 9.24am GMT If Dickens was writing the story of Europe’s economic plight, he might reprise A Tale of Two Cities – Berlin and Rome.Data just released shows that Germany and Italy’s fortunes continue to diverge, and workers are feeling the impact. Italy touches new unemployment record. Yet country seems resigned to decline, afraid of innovation and reforms, stuck in a sorry status quo 9.00am GMT In the City, the slide in the oil price is hurting the energy sector.Weir Group, the Glasgow-based engineering firm which serves the industry, is leading the FTSE 100 fallers, down 1%. Exploration firms Tullow Oil and BG Group are both down 0.8%. 8.39am GMT UK motorists should hopefully see the benefits of the lower oil price on the forecourt soon. Although, as consumer journalist Paul Lewis points out, only a small proportion of the petrol price actually pays for the hydrocarbons. Brent crude falls below $50 a barrel. That is 159 litres. So oil is about 20p a litre. Unleaded average 111p of which 76.45p is duty and VAT 8.32am GMT US crude oil is also being driven lower -- down another 1.5% below the $47/barrel mark. 8.27am GMT The speed of the slump in the oil price mirrors the selloff in autumn 2008, when Brent fell from around $100/barrel to just $36/barrel after the collapse of Lehman Brothers.The low prices are a result of high output clashing with sluggish demand, especially in Europe, which is still struggling with its debt crisis, and in Asia, where China’s growth is slowing and Japan is battling recession.On the demand side, output from North American shale producers remains high, although drilling is slowing, and producer club OPEC has so far resisted calls to cut production in support of prices. 8.04am GMT The slump in the oil price is undoubtedly good news for the global economy, argues Boris Johnson’s economic advisor, Dr Gerald Lyons:There seems to be lot of debate about weak oil prices. As these reflect ample supply not collapsing demand the net effect is good for world. 8.03am GMT Wow!!! Bloomberg breaking news: Brent Crude Falls Below $50 Per Barrel for First Time Since May 2009 8.01am GMT Brent Crude has just fallen below the $50/barrel mark for the first time in five and a half-years.The benchmark oil price has shed another 2% this morning, as the oil price continues to be pushed down by global economic growth fears and excess supplies.#Brent crude falls below $50/BBL for 1st time since May 2009“I would not be surprised if the price falls to as low as around $20... It is purely due to supply and demand. There is a ceiling for oil because high energy prices dampen economic growth.”Oil price was $53 pbl last night - lowest in 5yrs. Vital this is passed on to families at petrol pumps, through utility bills and air fares 7.55am GMT The fall in the oil price is hurting Russia’s currency -- the rouble has lost another 0.5% this morning to 63.5 roubles to the US dollar.#Russia Ruble continues to drop in sync w/ #oil. Now 63.70 per Dollar as Brent has hit fresh 5.5yr low at $50.22/bbl. pic.twitter.com/U6b23fdsiM 7.47am GMT Brent crude oil is weakening further, and is now just a few cents above $50/barrel.Brent about to break through $50 a barrel pic.twitter.com/FsgD9fHvkTTwitter, get ready for the " #Brent #Crude #Oil hits $50" storm... just got within 3 cents... 7.46am GMT This chart shows how the cost of Brent crude has halved since last summer, down to the brink of $50. 7.30am GMT Today’s selloff means Brent crude could fall below $50 today, suggests Bloomberg’s Andrew Barden:Here's an #oil chart to start your day. Will #Brent follow #WTI south of $50 today? #FreeFall pic.twitter.com/GMsRjncjej 7.28am GMT The oil price has continued to fall overnight, pushing Brent crude down towards the $50 mark for the first time since the last global downturn in 2009.Brent has shed another 1.6% so far today, or $0.87 per barrel, to just $50.22. That’s a new five and a half-year low.Oil prices continue to drop, Brent just shy of $50/bbl. Petrodollar drought is risk for mkts. http://t.co/ez9mmBC1Tz pic.twitter.com/obeU2G7gJuHow $50 oil changes almost everything http://t.co/N924K3qWx9 pic.twitter.com/AR0XBBh569 7.24am GMT Good morning, and welcome to our rolling coverage of events across the world economy, the financial markets, the eurozone and business.Today could be D-Day for Europe’s struggling economy. D for Deflation, that is.The oligarchs are high on our agenda,” George Stathakis, the shadow development minister and Syriza’s senior economic spokesperson said in an interview with the Financial Times. “They will be a priority for action.”Wednesday's FT: Greek hard-left party pledges to loosen economic grip of ‘oligarchs’ #tomorrowspaperstoday pic.twitter.com/QfScnnHaRXSainsbury's l4l sales down 1.7% over Christmas - not as bad as feared - so taken share from or are the major grocers fighting back? Continue reading...
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