(BRUSSELS) - Inflation in the 15 nations sharing the euro surged in March to the highest level since the bloc was formed in 1999 while confidence in the economic outlook slumped, official EU data showed on Monday.

The data further complicates the European Central Bank's task of keeping a lid on soaring inflation while also helping to keep the eurozone economy from falling into a rut.

The European Union's Eurostat data agency said that 12-month inflation in the eurozone jumped to 3.5 percent in March, up from 3.3 percent in February and slightly above economists' forecasts for 3.4 percent.

The figure, which came amid record oil prices around 110 dollars a barrel, was far above the European Central Bank's comfort zone of just under 2.0 percent.

"The latest eurozone data further deepen the ECB's dilemma between high and rising inflation on the one hand and slowing activity on the other," said economist Jennifer McKeown at consultants Capital Economics.

The record inflation came as confidence in the eurozone economy fell more than expected in March, hitting the lowest level in nearly two and a half years, according to a survey from the European Commission.

Its economic sentiment indicator for the eurozone fell to 99.6 points in March from 100.2 in February, hitting the lowest level since November 2005 and falling short of economists' forecasts for 99.9 points.

The European Union's executive arm blamed the bleaker outlook on weaker confidence in the services and construction sector while consumer confidence held steady.

"This heightens concern about the strength of eurozone domestic demand going forward, while exports are coming under increasing pressure from a deteriorating global economic environment and a record high euro," said economist Howard Archer at consultants Global Insight.

Despite the weakness in the eurozone's outlook, confidence in the economy of 27-nation European Union rose to 102.0 points from 100.3, boosted by an improvement in British services sector, the commission said.

At the country level, regional powerhouse Germany saw a slight improvement in overall economic confidence while the French outlook remained largely stable.

However, the Netherlands, Spain and Italy all saw sharp deteriorations in the outlook for their economies while Britain enjoyed surging confidence in the face of major financial market turmoil and tight credit conditions.

Despite the darker eurozone outlook, the commission said that its separate business climate indicator for the bloc improved in March, rising to 0.80 points in March from 0.71 in February and halting a three-month decline.

"The relatively high level of the indicator points to sustained industrial production growth in the first quarter of this year," the commission said.

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