BRUSSELS: Improved eurozone jobs and inflation data yesterday are welcome but offer only modest respite as the bloc struggles to get back on track after a record recession, analysts said.
“The uptick in inflation will ease concerns about deflationary risks,” said Martin van Vliet of Global Economics ING.
“But with high unemployment keeping wage growth down, disinflationary pressures ... remain firmly in place,” Van Vliet said.
The jobless rate in the 17-nation eurozone dropped to 12.1 percent in October from a record 12.2 percent in September, the Eurostat statistics agency said.
The total out of work fell 61,000 to 19.3 million.
Meanwhile, inflation rose to 0.9 percent in November from a four-year low of 0.7 percent in October which had stoked concerns the bloc risked a damaging cycle of falling prices.
The jobs report “is a modest pleasant surprise but does not change the picture of a very weak labour market,” said Johnathan Loynes of Capital Economics.
“Growth is nowhere near strong enough to make serious inroads into the jobless totals,” Loynes said, noting that while inflation was above his 0.8 percent forecast, “there are good reasons to expect it to fall further.”
“In short, unemployment is still high and deflation risks persist.”
Earlier this month, the European Commission revised up its 2014 unemployment estimate to 12.2 percent from 12.1 percent and cut its growth forecast to 1.1 percent from 1.2 percent.
It put 2014 inflation at 1.5 percent.
The debt crisis has savaged growth and jobs, with government austerity policies also sucking demand out of the economy.
Inflation has fallen steadily as a result — it ran at 2.2 percent in November 2012 — putting even more pressure on the European Central Bank to do more to support the economy.
The ECB bases its monetary policy on keeping inflation at near to two percent and earlier this month cut its benchmark interest rate to a record low 0.25 percent from 0.50 percent.
The eurozone escaped a record 18-month recession in the second quarter this year with growth of 0.3 percent but that slowed alarmingly to just 0.1 percent in the third.
Disinflation describes slowing price rises which remain in positive territory but reflect a stagnating economy in which growth and jobs are elusive.
The risk is that disinflation becomes deflation, or falling prices in real terms, which encourages consumers to put off buying goods in the expectation that if they wait, they will get them cheaper.
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