ECONOMY

Eurozone inflation up, unemployment steady, Eurostat reports

Eurozone inflation edged up to 0.4 percent from multi-year lows while unemployment was little changed, official data showed on Friday, providing only limited reassurance that a modest economic recovery remains on track.

Analysts said the figures were far from encouraging, with the European Central Bank likely to come under additional pressure from anxious governments to do more to get the economy moving again.

Inflation in the 18-nation eurozone rose to 0.4 percent in October from 0.3 percent in September, which was the lowest in five years, the Eurostat statistics agency said. The unemployment rate in September came in at 11.5 percent, unchanged compared with August and July. The total September jobless numbers came to 18.34 million, down only 19,000 from August.

The inflation figure remains far below the 2.0 percent target set by the ECB, whose core mission is to ensure price stability. Low inflation usually reflects soft demand in an economy and at current levels has stoked fears of deflation – when prices actually fall.

If deflation takes hold, consumers put off purchases knowing they can buy the same product cheaper if they wait, which undercuts demand further. Faced with that prospect, companies defer investment, hitting jobs and salaries which in turn adds to the downward spiral. In recent months, the ECB has taken increasingly radical action to try and pump up credit to boost demand and fend off deflation.

On the employment front, the figures highlight how the economy has slowed steadily, with job creation faltering to the dismay of governments everywhere. With inflation “still close to zero in October and the unemployment rate holding near a record high, there remains a significant risk of deflation,” said Jennifer McKeown of Capital Economics.

The slowdown first began to show up in the figures late last year, with eurozone economic growth in the three months to December 2014 just 0.2 percent, followed by 0.2 percent in first quarter 2014 and then zero in the second quarter. [AFP]