Tuesday 30 June 2009

CORRECT: DATA SNAP: OECD Annual Inflation Rate Hits Record Low

CORRECT:=DATA SNAP:OECD Annual Inflation Rate Hits Record Low

("=DATA SNAP: OECD Annual Inflation Rate Hits Record Low In May," at 1000 GMT, misstated the day in the first paragraph. The correct version follows:)

By Nicholas Winning


LONDON (Dow Jones)--The annual rate of inflation across developed economies dropped to its lowest level for at least 38 years in May following another sharp drop in energy prices, the Organization for Economic Cooperation and Development said Tuesday.

Consumer prices in the OECD's 30 members rose 0.1% in the 12 months to May, the lowest level since records began in 1971. Ten OECD member countries registered a drop in consumer prices on the year, thereby helping pull the annual inflation rate below the previous record low of 0.6% in April.

On the month, prices rose 0.2% in May, matching the rise seen in April. As recently as July 2008, the OECD annual inflation rate stood at an 11-year high of 4.9%.

According to the OECD, energy prices in its 30 members fell 16.2% in the year to may following a 13.5% drop in April. Food prices rose 2.7% in the year to May after increasing 3.4% in the 12 months to April.

The continued drop in the inflation rate is likely to stir concerns that the developed economies may be headed for a period of deflation. With the global economy set to contract this year for the first time since the end of World War II, prices for a wide range of goods and services may fall.

Deflation is commonly described as a sustained period of falling prices. It is bad for an economy because it encourages consumers to put off spending in the hope that goods will be cheaper still in the future, thereby slowing production and output in the world's major economies.

But in a sign that some prices are holding up, the OECD said core inflation, which excludes food and energy prices, eased only slightly to 1.7% in the year to May from 1.8% in April, matching a level last seen in March 2006.

The OECD report showed Iceland had the highest annual inflation rate of 11.7% in May while Ireland had the lowest at -4.7%. The other countries that registered a drop in prices on the year were the U.S., Japan, France, Switzerland, Sweden, Spain, Portugal, Luxembourg and Belgium.

Web site: www.oecd.org

-By Nicholas Winning, Dow Jones Newswires; +44 20 7842 9491; nick.winning@dowjones.com

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(END) Dow Jones Newswires

June 30, 2009 06:26 ET (10:26 GMT)

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