Deflation in the eurozone: Should investors be concerned?

EUROPE

With Greece already in the grip of deflation, and other economies teetering on the edge, Emile Gagna, economist at Candriam Investors, analyses how investors should react

For the last two years, the inflation rate in the eurozone has decreased steadily and now stands at just 0.4%. True, the eurozone is not a homogenous economy: core inflation in Germany is stable at above 1%, but in France it has slipped below 1%; whilst core prices have stabilised in Portugal and Spain, and have been falling in Greece since 2011. Still, the overall slowdown in the euro area inflation rate remains spectacular, and is feeding into fears the region will succumb to deflation, much like Japan in the 1990s. At the time, the Japanese economy was faced with a series of sho...