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Eurozone inflation rises, unemployment rate dips

By Michele Maatouk

Date: Friday 29 Nov 2019

LONDON (ShareCast) - (Sharecast News) - Eurozone inflation rose more than expected in November, while the unemployment rate ticked lower in October, hitting an 11-year low.
According to preliminary figures released by Eurostat on Friday, the annual inflation rate for the bloc edged up to 1% this month from 0.7% in October, coming in above consensus expectations of 0.9% but still well below the European Central Bank's 2% target.

Core inflation - which strips out energy and food - came in at 1.3%, up from 1.1% the month before and versus expectations of 1.2%.

Meanwhile, the seasonally-adjusted unemployment rate for the eurozone dipped to 7.5% in October from an upwardly-revised 7.6% in September and 8% in October 2018. This was in line with expectations and marked the lowest rate recorded since July 2008.

The unemployment rate for the EU-28 group of nations was 6.3% last month, unchanged from September and down from 6.7% in October last year.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said core inflation is flirting with a break into a new, and higher range.

He said the final data will tell the true story about inflation. "We suspect the core rate will dip a bit in the next few months, but a gradual increase is consistent with the trend in the labour market and wage growth, indicating that core inflation will rise to just under 1.5% towards the end of next year."

Bert Colijn, senior eurozone economist at ING, said the question is whether this is the start of a more sustained increase in inflation.

"Indeed, core inflation has been rising for three months in a row now and wage growth for the third quarter does suggest that upward pressure on prices is increasing. Then again, as businesses continue to lack confidence to push higher input costs onto the consumer, it is unlikely that this will lead to materially higher core inflation in the months ahead. In fact, selling price expectations for the months ahead declined again this month in both services and industry and haven't been this low all year.

"We would need to see much more optimism among businesses or substantially higher wage growth to see inflation rise sustainably. What a lovely environment to buy holiday gifts. All in all, for the ECB this increase in inflation seems to be good news for the hawks on the surface, but more evidence of a sustained increase is unlikely to follow unless business confidence increases substantially."



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