Unemployment rate remains stubborn across Eurozone while inflation falls

31st January 2014

The eurozone’s unemployment level remained in line with expectations at 12% for the third straight month in December writes Philip Scott.

Data from the EU’s statistics office Eurostat estimates that more than 19m across the member state region were unemployed in the last month of 2013. Compared with November 2013, the number of persons unemployed fell by some 129,000 in the euro area.

Among the member states, the lowest unemployment rates were recorded in Austria at 4.9%, Germany at 5.1% and Luxembourg with 6.2%. The highest were found in Greece and Spain.

Against expectations, eurozone inflation, fell in January, putting further pressure on the European Central Bank to reduce rates.

Consumer prices in the 18 countries fell to 0.7% year-on-year, down from 0.8% in December. It had been anticipated that the cost of living was going to increase to circa 0.9%, still well-off the European Central Bank’s target of under 2%.

Looking ahead, there are good reasons to expect euro-zone inflation to stay very low or fall further, including generally weak cost pressures, copious amounts of spare capacity and the strong euro says Jonathan Loynes, chief European economist at Capital Economics.

He says: “Accordingly, the risks to the ECB’s staff forecast of average inflation of 1.1% in 2014 are firmly to the downside. We expect an average rate of more like 0.5% and there is a real chance that inflation turns negative later in the year, particularly if oil prices fall further.”

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