Portugal springs out of deflation while UK reverses into it

Prices in Portugal can be expected to rise slightly as the country experienced inflation of 0.5% in April, following on from a increase the previous month of 0.4%.

This was ahead of the eurozone average of zero inflation in April.

December, January and February in Portugal were marked by negative inflation, but in March prices started to rise.

Euro area prices on average went up for cafes and restaurants, rents and vegetables while falls were seen in the costs of fuel for transport, heating oil and gas.

Prices have been falling in Spain for at least the last six months in a row, with April showing a -0.7% decline.

But the lowest annual rates were in Greece (-1.8%) and Cyprus (-1.7%). Deflation makes it even more demanding for governments to pay their debts.

Conversely, prices were rising at their most rapid in Malta (1.4%) and Austria (0.9%).

Outside the euro region, Britain was declared to be official in deflation and for the first time since at least 1996.

Prices, as measured by the consumer prices index (CPI), fell by 0.1% in the year to April, following zero inflation in February and March.

A fall in the price of food and cheaper petrol costs contributed to the country’s deflation.

Chancellor Osborne said the drop was good news for family budgets and at a time when wages are rising strongly, unemployment is falling and the economy is growing.

The Governor of the Bank of England said the deflation is likely to be temporary and should climb to “above 1%” by the end of this year.

Most economists seem to concur against a backdrop of underlying fear of the pernicious effects of long-term deflation.

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