Major economies post record price drops–OECD

PARIS: Advanced economies experienced deflation of 0.1 percent in the year to June as a result of oil prices being more than halved since their summer 2008 peak, data from the OECD released Tuesday showed.

Consumer prices for energy were down 15.5 percent for the 12-month period—25.5 percent in the United States and 11.6 percent in the 16-member eurozone, the 30-member Organization for Economic Cooperation and Development (OECD) said.

But food prices were up 1.8 percent across the OECD countries—although down 0.2 percent in the eurozone—which showed a slowing from May’s 2.6 percent on an annual basis.

And excluding food and energy, consumer prices rose by 1.7 percent as a whole in the year to June, compared with 1.8 percent in May.

Month-on-month, prices rose by 0.4 percent in June, having risen 0.1 percent in May on a 12-month comparison.

In the US, the Consumer Price Index fell 1.4 percent, while in Japan it prices shed 1.8 percent. Over the year to June, Britain experienced annual inflation of 1.8 percent.

While the prospect of falling prices may delight consumers, deflation, or a run of falling prices, can wreak havoc on the broader economy by causing a downwards spiral of prices, production, unemployment and further deflation.

Meanwhile Russia, which is not a member of the OECD, issued official data showing stable inflation of 0.6 percent in July on a month-by-month comparison.

Inflation in Russia was now running at 8.1 percent since the start of 2009 after slowing since April. Last year’s inflation reached 13.3 percent in Russia.

World oil prices plunged dramatically after hitting record peaks above $147 a barrel in July 2008, but have recently recovered and held above $70 a barrel Tuesday amid positive signs for the ailing global economy. — AFP