Major economies record 0.1 pct deflation: OECD

PARIS (AFP) – Advanced economies experienced deflation of 0.1 per cent 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 on Tuesday showed.

Consumer prices for energy were down 15.5 per cent for the 12-month period – 25.5 per cent in the United States and 11.6 per cent in the 16-member eurozone, the 30-member Organisation for Economic Cooperation and Development said.

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

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

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

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

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 per cent in July on a month-by-month comparison.

Inflation in Russia was now running at 8.1 per cent since the start of 2009 after slowing since April. 2008 inflation reached 13.3 per cent in Russia.

World oil prices plunged dramatically after hitting record peaks above $US147 per barrel in July 2008, but have recently recovered and held above $US70 a barrel on Tuesday amid positive signs for the ailing global economy.