Figures show that the annual rate of euro zone inflation eased unexpectedly in January to 1.8% despite an increase in German VAT.

The decrease confounded economists' expectations for inflation to be unchanged from December's 1.9%. An initial estimate from Eurostat had also signalled that the rate would hold steady.

The decrease left inflation spot on the European Central Bank's preferred level close to but less than 2%. Many economists' concerns that an increase in German VAT in January would nudge inflation higher in the euro zone have so far proven to be unfounded.

Euro zone inflation has been falling because of lower energy prices, but underlying inflation, which excludes the impact of energy and food, has held largely steady. This rate rose to 1.7% in January from 1.5% in December.

Separate figures from Eurostat showed that the euro zone's unemployment rate  eased in January to 7.4%, the lowest level on EU records, which date from 1993. It was down from 7.5% in December.

A European Commission report showed that economic optimism in Europe  bounced back in  February after a weak spot in January.

The commission's euro zone economic sentiment indicator rose to  109.7 points in February from 109.2  in January, ahead of economists' expectations for a fall.

Separately, the commission published a euro zone business climate  indicator for February that also showed an improvement after a weak  start to the year. It rose to 1.56 points in February from 1.39 in January.