Inflation stays high in euro area, while survey points down
BRUSSELS: Higher prices for transportation fuel, heating oil and dairy products pushed yearly inflation in the euro currency area to record levels in January, while the unemployment rate held at 7.1 percent, the European Unions statistical agency said Friday.
Businesses are so far not cutting jobs but companies have mixed views about rocky times ahead, with an EU confidence survey slipping again in February as industry and the services sector were more downbeat while retailers saw sales picking up.
The European Commission last week cut its growth forecast to 1.8 percent for the euro zone this year, saying the global economy looked “unusually uncertain” but the slowdown could be short-lived if the U.S. recovers later this year.
The EU statistics agency Eurostat confirmed an earlier estimate of 3.2 percent inflation last month in the 15 nations that share the euro, the fastest price increase in 15 years and well above the European Central Banks guideline of just under 2 percent.
The ECB has held back from damping inflation by raising borrowing costs over concerns that the euro economy is slowing and banks are still reluctant to lend money in the wake of last summers credit crisis.
Unlike the U.S. Federal Reserve or the Bank of England, the ECB has not cut rates, leaving its key interest rate unchanged at 4 percent since last summer.
EU economic weather vanes painted a mixed picture for the economy on Friday with Eurostat figures showing that worries about a slowing global economy are not so far forcing job losses.
Unemployment in the euro zone was 7.1 percent in January, matching a revised estimate for December. The 7.1 percent rate is the lowest since the currency was launched nine years ago. The previous estimate for December was 7.2 percent.
A European Commission survey of business and consumer confidence fell to 100.1 in February in the euro area, falling to levels not seen since the start of 2006, before a recent growth spurt saw businesses expand on strong exports abroad and more spending at home.
The services sector slipped markedly in February as managers saw demand drop in the months ahead. Industry and construction were also downbeat but confidence levels are still above a long-term average.
Retailers, however, were more positive about current and expected sales - with German, Italian and British confidence surging while Spanish shops far more pessimistic.
Consumer confidence in the euro area was unchanged at a three-year low.
Another survey, the EUs business climate indicator, also continued to decline in February to 0.72 as industry managers cut their own forecast for output in the months ahead and flattened expectations for future orders.
