Euro zone inflation back at five-year low in November

By Robin Emmott

BRUSSELS (Reuters) - Annual inflation in the euro zone cooled to 0.3 percent in November as energy prices fell, suggesting deflation remains a real threat for the European Central Bank.

The reading on Friday marked a return to September's five-year low for consumer inflation and was in line with a Reuters poll forecast. German data this week showed inflation in the biggest euro zone economy at its lowest in nearly five years.

The November euro zone figure compared to 0.4 percent in October. Consumer inflation has not been at the ECB's target level of close to 2 percent since the start of 2013 and has been falling since late 2011 when it peaked at 3 percent.

The ECB considers anything below 1 percent to be in its "danger zone" and the bank may be forced to take more radical steps to prevent deflation -- a concern for the bloc because that would make its debts harder to bring down.

Deflation also hurts demand because consumers generally stop spending as they expect prices to fall further, pushing the economy into a deeper downward spiral.

The ECB is buying covered bonds and asset-backed securities and despite German resistance may decide as soon as the first quarter of next year to begin buying sovereign bonds, as Britain, the United States and Japan have done.

Friday's inflation number alone may not bring such a quantitative easing programme any closer, however.

"Pressure has been building for a while. There are other big picture things going on, there's the fall in oil prices, the dynamics on the ECB Governing Council," said Greg Fuzesi, an economist at JP Morgan. "They are the more important things rather than the inflation print per se."

Energy prices slipped 2.5 percent from October and by 1.1 percent on an annual basis. Core inflation, stripping out volatile energy and food prices, was 0.7 percent, unchanged from October but still on a downward trend, the EU's statistics office Eurostat said.

Also reflecting the general malaise in the euro zone's economy, unemployment remained at 11.5 percent of the working population for the third month in a row in October.

The number of jobless people actually rose by 60,000 to 18.39 million.

(Editing by Catherine Evans)