The annual rate of consumer price growth in the euro area tumbled to its lowest mark in nearly a two years in September, falling to a less-than-expected 4.3% from 5.2% in August, according to preliminary data from EU statistics office Eurostat.

Energy prices fell 4.7% from September 2022, the office said.

Core inflation, which excludes volatile products such as energy and food, also showed a surprisingly strong decline with a decrease to 4.5% from 5.3%. 

This hardens arguments for an end to further increases in borrowing costs from the European Central Bank, which has raised interest rates 10 times in succession since July of last year. 

While one concern – sharply rising prices – seem to be fading, another has taken centre stage: an economic slowdown in the euro area. Five economics institutes have lowered their joint growth forecasts for Germany, Europe’s largest economy. The thinktanks, which include Germany’s ifo institute (Munich; www.ifo.de), said they expect the world’s fourth-largest economy to contract 0.6% this year, a downgrade from their spring prognosis of a 0.2% decline. Next year’s GDP outlook was slashed to 1.0% growth from the previous 1.5% prediction.

These reductions followed the ECB’s downward revisions for Eurozone growth, with GDP expected to only grow 0.7% this year and 1.0% in 2024 after June estimates of 0.9% and 1.5%, respectively.

In late September, ifo reported a fifth straight decline in German business confidence but more optimism among companies in the plastics and rubber industry.