Euro area inflation unexpectedly slowed in January as the economy cooled and governments cut spending across the 17-nation currency region.
The inflation rate in the euro area dropped to 2.6 per cent from 2.7 per cent in the previous month, the European Union’s statistics office in Luxembourg said on Wednesday. It had initially estimated January’s inflation rate at 2.7 per cent. Before on Wednesday’s revision, economists forecast February inflation, due tomorrow, to slow to 2.6 per cent, according to the median of 35 estimates in a Bloomberg News survey.
European companies are struggling to pass on higher costs as budget cuts undermine consumer sentiment just as global export demand weakens. Still, while the European Commission predicts that the region’s economy will shrink this year, European Central Bank President Mario Draghi has said the situation “seems to be stabilising.”
Consumer prices dropped 0.8 per cent from December, the statistics office said. Inflation slowed in 16 out of 27 EU member states, accelerated in nine and remained steady in two. Euro-region core inflation, excluding volatile costs, slowed to 1.5 per cent from 1.6 per cent in December.
Cost pressures
Energy costs rose 9.2 per cent in January from a year earlier, down from a 9.7 per cent gain in the previous month, on Wednesday’s report showed. Prices of clothes rose 0.9 per cent.
Adding to signs of easing cost pressures across the region, producer price inflation probably slowed to 3.5 per cent in January from 4.3 per cent in the previous month, a Bloomberg survey shows. Euro region unemployment may have held at 10.4 per cent in January, according to a separate survey.
The ECB, which aims to keep inflation just below two per cent, will hold its next monetary assessment on March 8. It will publish its latest inflation projections on the same day.
German jobless rate holds at lowest in two decades
Germany’s unemployment held at the lowest in more than two decades in February, adding to signs Europe’s largest economy is regaining some strength after shrinking in the fourth quarter.
The adjusted jobless rate held at 6.8 per cent from January, the Nuremberg-based Federal Labour Agency said on Wednesday. That’s the lowest since Germany’s reunification more than two decades ago. The number of people out of work remained at 2.87 million after declining 26,000 in the previous month. Economists forecast a drop of 5,000 this month, the median of 29 estimates in a Bloomberg News survey shows.
“This signals that the labor market continues to be robust and we expect this development will largely continue,” said Eckart Tuchtfeld, an economist at Commerzbank AG in Frankfurt.
“We’ll see movement in the right direction over the course of the year after the economy cooled over the winter. Growth will take hold later this year, so we don’t see any problems.”
