Euro zone inflation at four year low, while joblessness remains at record high

Thursday 31 October 2013 18.55
Euro zone inflation down to 0.7% year on year in October
Euro zone inflation down to 0.7% year on year in October

Euro zone inflation unexpectedly dropped to a nearly four-year low in October and unemployment stood at a record high in September, increasing pressure on the European Central Bank to further cut interest rates.  

Inflation in the euro zone fell to 0.7% year-on-year in October as energy costs fell 1.7% on the year, the lowest reading since November 2009.  

The inflation rate dropped below 1% for the first time since February 2010, a flash estimate from the European Union's Statistics Office showed. Analysts expected the inflation rate to be flat at 1.1% in October.  

The very low inflation rate increases the chances that the ECB might consider another interest rate cut.

Costs of food, alcohol and tobacco products rose by 1.9%. Core inflation, which excludes prices of energy, food, alcohol and tobacco slowed to 1.1% year-on-year from 1.4% in September.  

Meanwhile, the jobless rate in 17 country euro zone was flat at 12.2% against an upwardly revised August figure, but 60,000 more Europeans were unemployed on the month, Eurostat said.  

The global financial crisis, followed by the European sovereign debt crisis wiped out hundreds of thousands of jobs over the past four years and no swift turnaround is in sight as job problems in Europe are of structural and long-term nature.    

Young Europeans, aged 15-24, are the ones most affected with youth jobless rates in European Unions countries like Spain, Greece and Croatia above 50%. They are below 10% only in Germany and Austria.  

The unemployment rate in Germany inched down to 5.2% after being flat for three consecutive months, while the second largest economy France and third largest Italy registered a modest increase in their jobless rates in September.    

European leaders have made the fight against high unemployment one of their key priorities. The European Central Bank considers the unemployment rate as unacceptably high as Europe risks losing a generation of young workers.