Another chart piling pressure on ECB: Producer prices slide most in a year

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LONDON (MarketWatch) - The bad data washing over the eurozone just won't stop.

On Tuesday, the latest reading on producer prices missed forecasts, marking another nail in the coffin for hopes of an imminent recovery of the 18-country bloc and thus ramping up pressure on the European Central Bank to be more creative with its easing measures.

Usually, the producer-price index doesn't get much attention in the vast sea of economic data, but with concerns that the eurozone could slip into deflation, even the smallest hints are being closely scrutinized. Consumer prices fell 0.4% in October, their biggest drop in a year.

'October's marked fall in producer prices will fuel concern that eurozone consumer-price inflation is headed down even further from an equal five-year low of 0.3% in November,' said Howard Archer, chief U.K. and European economist at IHS Global Insight, in a note on Tuesday. 'Indeed, with oil prices down sharply, there is an ever increasing risk of the eurozone suffering overall deflation within the next few months.'

Most economists fear deflation like a demon because of concerns it'll get more expensive to pay off debts, hurt consumer spending and increase unemployment. To avoid seeing a Japanese-style deflationary spiral in the eurozone, the ECB has vowed to bring inflation closer to its target of just below 2%, which has prompted speculation that it might launch full-scale government-bond purchases early next year. Read: These 5 charts show how much Europe needs QE

However, a crucial factor in the weak producer-price and consumer-price inflation readings is the effect from the slide in oil prices since the summer. The ECB normally looks through the effect from shocks to energy costs, but 'it will be worried that a further fall in the headline inflation rate or even deflation will further weaken inflation expectations,' Archer said in the note. Read: How OPEC could drive Draghi to pull QE trigger

The ECB meets on Thursday. It isn't expected to cut interest rates or expand its bond-buying program to government bonds this time, although some analysts argue the central bank might reveal plans for a corporate-bond buying program. It already buys covered bonds and asset-backed securities.

Also read: Investors shouldn't fight the ECB in 2015