Eurozone Inflation Near 4-Year Low; Unemployment At Record 12.2%

(RTTNews) - Eurozone inflation reached a four-year low in October helped by the strength of the euro, while the unemployment rate remained at a record high in September, suggesting that additional measures are needed to preserve the recovery, official data showed Thursday.

Inflation fell to 0.7 percent in October, the lowest rate since November 2009, flash estimate published by Eurostat showed. The rate was expected to stay unchanged at 1.1 percent in October.

Inflation has remained below the European Central Bank's target of 'below, but close to 2 percent' for the ninth month in a row. The latest slowdown was driven by a notable fall in energy prices, combined with an easing in food inflation.

Another report from Eurostat showed that the unemployment rate held steady at a record-high of 12.2 percent in September after the rate for August was revised up from 12 percent.

The number of unemployed persons in euro area was 19.447 million in September, which was up by 60,000 from August. Compared with September 2012, unemployment rose by 996,000.

The unemployment rate in EU28 was 11 percent, also stable compared with August. Among the EU member states, the highest unemployment rate was in Greece, followed by Spain.

IHS Global Insight Chief European economist Howard Archer said that a combination of very low inflation, an uncomfortably strong euro, and a failure of Eurozone growth to gain appreciable momentum will eventually prompt the ECB into taking its interest rate down to 0.25 percent from 0.50 percent.

Given all this and the recent further rise in the euro, the ECB may soon provide further policy support, possibly in the form of another long-term refinancing operation, Ben May, European economist at Capital Economics said.

Data today showed that core inflation, which excludes cost of energy, food, alcohol and tobacco, eased to 0.8 percent in October from 1 percent a month ago.

Energy prices declined 1.7 percent, sharper than the 0.9 percent decrease seen in September. Meanwhile, growth in food, alcohol and tobacco prices eased to 1.9 percent from 2.6 percent.

With energy price base effects becoming less favorable in the coming months and some indirect tax increases in the pipeline early next year, the falling streak in inflation is probably nearly over, said ING Bank NV's economist Martin van Vliet.