Prices decline in Eurozone

01 October 2009

BRUSSELS: Consumer prices continued to decline in the Eurozone in September according to the European Union, but the organisation also found that popular sentiment in the region is now starting to improve.

Prices in the Eurozone fell by 0.3% year-on-year in September, the fourth straight monthly contraction, after registering a decrease of 0.2% in August, the EU's statistics office said.

Martin van Vliet, a senior economist at ING Bank, predicted that “inflation will likely remain subdued, restrained by further falls in core inflation, as firms continue to compete for market share.”

A separate survey by the European Commission, however, established that popular perceptions of the economic climate improved from 80.8 points in August to 82.8 points in September.

Overall consumer confidence also rose to -19 points in the ninth month of 2009, compared with the total of -22 points recorded in August.

Despite this, a number of major European brands and retailers have continued to introduce discounts as they seek to drive growth in the downturn.

Carrefour, the French hypermarket giant, is one example of a firm following such a strategy, and will spend some €600 million €600 million ($877bn; £548bn) on funding price cuts.

Mercadona, the Spanish supermarket chain, has similarly stated that it is seeking to reduce its prices by an average of 17% over the course of 2009 as a whole.

Puma, the German athletic and sporting goods manufacturer, also reported that the 16% slide in its profits in Q2 was largely due to an increase in promotional activity surrounding its products.

In the UK, which is outside the Eurozone but has suffered particularly heavily during the downturn, Sainsbury's has announced that it is launching a new voucher scheme.

This will result in consumers receiving coupons providing as much as 20% off both own-label and branded FMCG goods in its stores.

According to the company, this initiative constitutes a "multi-million pound investment over five years", and Procter & Gamble, Unilever and Heinz are among the manufacturers that have signed up to take part in the scheme thus far.

Data sourced from Bloomberg/Wall Street Journal; additional content by WARC staff