Euro unemployment at record
Euro-area unemployment rose to a record and inflation quickened more than economists forecast as rising energy costs threaten to deepen the economic slump.
The jobless rate in the economy of the 17 nations using the euro was 11.3 per cent in July, the same as in June after that month's figure was revised higher, the European Union's statistics office in Luxembourg said today. That's the highest since the data series started in 1995.
Inflation accelerated to 2.6 per cent in August from 2.4 per cent in the prior month, an initial estimate showed in a separate report. A 12.4 per cent surge in crude-oil prices over the past two months is leaving consumers and companies with less money to spend just as governments seek ways to contain the debt crisis.
European economic confidence dropped more than economists forecast to a three-year low in August and German unemployment increased for a fifth month, adding to signs the euro-area economy continued to shrink in the third quarter.
"The whole euro zone is undergoing negative growth developments," Don Smith, a London-based economist at ICAP Plc, told Ken Prewitt on Bloomberg Radio yesterday. "The sense is that increasingly the euro-zone crisis is bearing down on countries in northern Europe and Germany in particular and this is really forcing officials' hands toward coming up with a firm solution."
The euro was higher against the dollar, trading at $1.2587 at 12:54 p.m. in Brussels, up 0.7 per cent on the day. The European currency has declined more than 12 per cent in the past year as EU leaders have battled the debt turmoil that has prompted five euro-area countries to seek external aid.
The European Central Bank, which will publish its latest economic projections next week, said in June that the euro-area economy may shrink 0.1 per cent this year, with inflation averaging 2.4 per cent. The ECB aims to keep annual gains in consumer prices just below zero.
With the economy cooling and executives and consumers growing more pessimistic, companies may find it difficult to pass on higher prices and instead focus on cost cuts.
A gauge of employment expectations among euro-area manufacturers declined in August, the European Commission said yesterday.
In Germany, Europe's largest economy, which helped soften the region's slowdown in the first half of the year, indicators are also weakening. The number of people out of work in Germany increased a seasonally adjusted 9,000 to 2.9 million in August, more than economists in a Bloomberg survey had forecast.