Deflation is officially back in the euro zone. Consumer prices fell across the 18 countries sharing the single currency in the 12 months to December according to the latest figures from the EU statistics agency euro zone.

It is the first time the inflation rate has turned negative since October 2009.

Dr Micheál Collins, senior research officer with the Nevin Economic Research Institute, says a little bit of deflation for a short period of time is not a problem, but the real worry is that we might see deflation take hold in the euro zone. He says that although there are some short term benefits to falling prices, if one looks at the economy overall it might have knock-on implications on people's - and businesses' - spending plans. It would also impact on government spending plans. The fear is that households will stop spending, or slow down spending money which further complicates the challenges the already weakened European economy already faces. If people expect things to be cheaper in a month's time or a year's time, they will not buy them today, he states. 

Dr Collins says the real life-blood of an economy is actually consumers spending money and if that stops or slows down, then in turn the economy slows down. The euro zone inflation rate is 0.2% and the ECB's target rate is close to 2%, which means there is a real need for the ECB to respond. But he says there has been a real lack of progress from the ECB to deal with the problem. He says that when they meet again later this month, ECB policymakers will consider the introduction of quantitative easing which will start putting some new money into the European system. This will give the banks more money to lend to consumers and therefore put more money in the economy to get it going again.


MORNING BRIEFS - For many years in January, building materials giant CRH would publish details of its acquisition spend. This year it is giving a progress update focussed on the businesses it has sold. The company said a multi-year €1.5-2 billion divestment programme announced last August is well underway. CRH says it has completed 16 transactions realising proceeds of €350m over the past year. That is compared to just €190m spent on acquisitions.

*** Further details are expected this morning on the legislation to be introduced to provide for the Corporation Tax rate in Northern Ireland to be reduced from the current rate of 21% to compete with the 12.5% rate available in the Republic. Northern Ireland Secretary of State Theresa Villiers is scheduled to make an announcement later this morning in Lisburn. It is understood she will give details of the legislation and the timetable involved. All of this is subject to the Assembly and the executive at Stormont holding up its side of the bargain as agreed following those marathon talks last month.

*** Builders merchant, manufacturing and retail group Grafton has reported an 9.5% rise in revenue in 2014. In a trading statement Grafton, which operates builders merchants here and in the UK and is also the owner of the DIY chains Woodies and Atlantic Homecare, said it is benefiting from a sustained recovery in the UK and Irish economies. Grafton said its UK merchanting business, which accounts for three quarters of its revenue, saw increased demand from consumers repairing and extending their homes and from a pick-up in new home building activity. The company also reported signs of a modest recovery in retail sales in Ireland but noted that household finances continued to be under pressure. Its DIY outlets reported flat revenue for the year in like-for-like terms, which excludes the impact of store openings or closures.