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Eurozone unemployment, inflation fall: Eurostat

Eurozone unemployment and inflation data painted a mixed economic picture on Thursday (July 31), with the jobless rate edging down while softer prices raised question marks over consumer demand, clouding the outlook.

BRUSSELS: Eurozone unemployment and inflation data painted a mixed economic picture on Thursday (July 31), with the jobless rate edging down while softer prices raised question marks over consumer demand, clouding the outlook.

The jobless rate in the 18-nation eurozone fell to 11.5 percent in June from 11.6 percent in May, hitting the lowest level since September 2012, the Eurostat statistics agency said. July inflation dropped to 0.4 percent from June's 0.5 percent, to the lowest since late 2009 in the aftermath of the global financial crisis.

Declining inflation increases the risk of outright falling prices, known as deflation, which deters consumers from spending in the belief they can wait and buy more cheaply later. If that happens, demand suffers and companies put off investment, hurting employment and so setting off a vicious circle which can drag down the whole economy.

In July 2013, inflation ran at 1.6 percent, even then still well short of the European Central Bank target of around 2.0 percent. The ECB has moved in recent months to stimulate the economy and will likely face fresh calls to do more.

The July inflation report "underlines the weakness of price pressures (in the eurozone) and and support our view that the ECB has more work to do to tackle the risk of deflation," said Jonathan Loynes at Capital Economics.

JOBLESS TOTALS DOWN IN SLOW RECOVERY

Eurostat said there were 18.41 million people without a job in the euro single currency area in June, down 152,000 from May and 783,000 compared with June 2013 when the unemployment rate stood at 12 percent.

In the full 28-member European Union, the jobless rate improved to 10.2 percent from 10.3 percent, with 25 million people out of work, down 198,000 from May and 1.54 million from a year earlier when the rate was 10.9 percent, it said. Austria had the lowest unemployment rate in June at 5.0 percent, followed by Germany, the bloc's economic powerhouse on 5.1 percent, while twice-bailed out Greece on 27.3 percent and Spain, 24.5 percent, topped the list again.

In the highly sensitive category of under-25 unemployment, the eurozone came in at 23.1 percent or 3.32 million, down from 23.9 percent a year earlier. The EU was on 22 percent or 5.13 million, compared with 23.6 percent in June 2013.

Unemployment is a "lagging indicator," meaning it is slow to reflect changes in the underlying economy. In this case, the eurozone edged out of recession in mid-2013 but growth since then has been modest, making a dent in record high unemployment only very slowly to the dismay of EU leaders under pressure to produce jobs.

Recent data has suggested the recovery may even have peaked out, which would mean that while unemployment should continue to show some improvement in coming months, a real turnaround may prove elusive. Loynes said the unemployment figures "brought slightly more encouraging news (but)... there is still a lot of spare capacity in the labour market, adding to the downward pressure on wages and prices." 

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