-Viola Julien, an economist at Helaba bank
Deflation contagion spreads gradually around Europe, as consumer prices growth in Germany turned negative in January for the first time in more than five years. According to the Federal Statistics Office, inflation in the Euro zone's number one economy dropped 0.5% on year in January, the lowest level since September 2009. Measured on a monthly basis, German HICP, the reading that allows comparison between inflation figures in other European countries, declined 1.3% from December. Meanwhile, German unemployment rate fell to the lowest level in more than two decades, the Labour Office reported. The jobless rate slid to 6.5% in January, boosting hopes that private consumption will help boost growth in the Europe's growth engine this year. The number of German unemployed dropped 9,000 in January following a 25,000 decline in December. Germany's improving labour market, coupled with lower energy prices, has boosted consumer sentiment and spending. The monthly survey by GfK has forecasted consumer sentiment will reach a 13-year high of 9.3 points in February, jumping from 9.0 points in December.
Meanwhile, confidence in Italy's manufacturing sector dropped, with the corresponding index falling to 97.1 in January, down from 97.5 a month earlier.
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