Euro jobless, inflation rates climb

Official figures show that inflation increased across Europe in January. Consumer prices in the 16 euro zone countries crept up at an annual rate of 1% in January, according to the Eurostat data agency.

The increase came during a period when the value of the euro slipped considerably from a peak of $1.50 to under $1.40.

Prices had risen at an annual rate of 0.9% in the run-up to Christmas, at that stage a sharp increase from the 0.5% reading for November which marked the first time that prices, on a 12-month basis, had risen since April.

Separate Eurostat figures showed that one in 10 workers across the euro zone is now unemployed. The seasonally adjusted unemployment rate hit 10% in December. It was the highest rate since the currency was launched a decade ago and up from a downwardly-revised 9.9% in November.

No sign of euro lending pick-up

The European Central Bank has said euro zone bank lending to the private sector was stable in December, in a sign that credit is still not really flowing even though the economy has begun to expand again.

Lending was flat following three months of declines. It contracted by 0.7% in November and by 0.8% in October.

Meanwhile, growth of the ECB's M3 money supply indicator, which measures cash, deposits and various other financial items, fell by 0.2%, after a drop of 0.3% in November, its first.

Lending and money supply data illustrate consumer demand and overall activity in an economy.

Falling figures point to lower demand, which normally means inflation will ease and allow the ECB to cut interest rates. But rates are already at a record low of 1% and are not expected to be cut further.

The euro zone emerged from recession last year but most economists believe its recovery is likely to be weak and uncertain, with higher unemployment and sluggish consumption posing hurdles to strong growth.

A breakdown of the ECB data showed that loans to households continued a modest upward trend, but that lending to businesses fell further.

Results of the ECB's latest bank lending survey were also published, and showed that a tightening trend that began in mid-2007 was still in effect. Looking ahead, the 118 euro zone banks surveyed expected credit standards on loans to become slightly more restrictive in the first three months of this year.