The eurozone's fragile economy suffered another
blow Friday with the release of data showing both unemployment
hitting a record high, and inflation picking up more than forecast.
While the European Union's statistics office Eurostat said
unemployment in in the 17-member eurozone climbed to 11.3 per cent in
July after another 88,000 people lost their jobs, it also said that
inflation in the currency bloc hit 2.6 per cent in August.
The rise in jobless queues across the eurozone combined with the
gain in inflation is likely to hit private consumption in the
currency bloc as it edges closer towards its second recession in two
years.
"The rise in eurozone unemployment in July, coupled with the
pickup in inflation in August, supports the view that the downturn in
household spending will intensify in the second half of this year",
said Ben May, European economist with the Capital Economics research
group.
But the data is also likely to add to the pressure on the European
Central Bank as it considers its next step in the long-running battle
to end the eurozone debt crisis.
The publication of the figures form part of the buildup to a key
meeting Thursday of the ECB's governing council, which is expected to
consider plans to reactivate the bank's government bond-buying
programme.
The August rise in consumer prices pushed inflation further away
from the ECB's annual target of 2 per cent. It also means that
inflation has breached the limit for 21 months in a row.
This, as a result, reduces the Frankfurt-based bank's room to
manoeuvre as it considers how to bolster economic growth in the
eurozone, including delivering another interest rate hike in the
coming months.
While Eurostat does not release details of its preliminary
inflation data until later in the month, analysts have been warning
of the threat posed to consumer prices by the recent rise in energy
costs.
Analysts had expected Friday's data would show annual inflation
nudging up to 2.5 per cent from 2.4 per cent in July.
Still, inflation might have reached its peak for the year. Both
analysts and the ECB are expecting inflationary pressures to ease by
the end of the year as the eurozone economy slows. They also both see
consumer prices falling below 2 per cent next year.
"Inflation is likely to remain at these levels over the coming
months, but it should start to decline before year-end," said BNP
Paribas economist Clemente De Lucia. "The average for 2013 is likely
to be below 2 per cent."
Releasing the unemployment data, Eurostat also revised up the June
jobless rate from an originally reported 11.2 per cent to 11.3 per
cent.
This came as eurozone states battle on with a tough round of
fiscal austerity aimed at slashing high deficit-and-debt levels.
Earlier this month Eurostat said the eurozone economy shrunk by
0.2 per cent in the three months to the end of June after
stagnating in the first quarter as governments with large parts of
the bloc already in recession.
In July, the total number of unemployed people in the eurozone
zone stood at 18 million, up 2 million from a year earlier, according
to the Luxembourg-based statistics office said.
This included 3.4 million people under the age of 25, leading to a
youth unemployment rate of 22.6 per cent.
Spain continued to top the list, posting an overall unemployment
rate of 25.1 per cent and a youth unemployment rate of 52.9 per cent.
Along with Italy, Spain has recently emerged at the centre of
eurozone debt crisis, which has now entered its third year.
The lowest overall jobless rates were recorded in Austria (4.5 per
cent), the Netherlands (5.3 per cent), Germany and Luxembourg (both
5.5 per cent).
In the wider 27-member EU, 43,000 more people became unemployed,
pushing the total to 25 million. The EU unemployment rate remained at
10.4 per cent.
