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EU inflation weak, unemployment stagnates

AAP logoAAP 30/09/2016 Helen Maguire

Eurozone inflation jumped to 0.4 per cent in September, its highest rate in almost two years, while unemployment remained level in the currency bloc, according to data published by the EU statistics agency Eurostat.

Despite the improved inflation estimate, which was in line with analysts' expectations, the figure is still significantly below the annual target of the European Central Bank (ECB), which is just below twp per cent.

Eurozone inflation had hovered around 0 per cent for much of the year, as fears of deflation dogged the 19-country currency area.

European officials have argued, however, that external factors such as oil prices have kept rates low, rather than across-the-board drops in price levels.

Analysts put the inflation increase down to a gradual recovery in energy prices, which fell by just three per cent in September, compared to 5.6 per cent the previous month.

An agreement this week by the Organization of the Petroleum Exporting Countries to cap production will likely increase oil prices and "push the headline inflation rate higher in the coming months", predicted ING Bank analyst Bert Colijn.

But Fabio Fois of Barclays bank called the inflation data "somewhat weak and worrying", noting that price increases in other areas were subdued or unpredictable.

Prices rose in September for services; food, alcohol and tobacco products; and non-energy industrial goods.

Eurozone unemployment lingered at 10.1 per cent in August - where it's stayed since April this year - while the overall number of people out of work rose compared to July, Eurostat said.

The currency union has made some progress in whittling down its jobless rate since it hit a record 12.1 per cent in 2013, but many still consider it unacceptably high.

A total of 16.3 million people were out of work in the eurozone in August. Just under three million of them were under the age of 25, leading to a youth unemployment rate of 20.7 per cent.

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