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Eurozone inflation slows to 0.2 per cent, unemployment stable

30 June 2015, 16:00 CET
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(BRUSSELS) - Inflation in the eurozone slowed to 0.2 percent in June, official data showed on Tuesday, with consumer prices rising just slightly in Europe despite unprecedented stimulus measures by the European Central Bank.

The eurozone suffered four months of deflation earlier this year and a slowing of inflation will damage hopes that the currency bloc is safely back on solid economic footing, despite the huge problems in Greece.

Developments in the eurozone's economy are being overshadowed by the worsening Greek debt crisis with talks with creditors on a new bailout at an impasse and the country set to miss a payment to the International Monetary Fund on Tuesday.

Eurozone unemployment meanwhile remained stable at 11.1 percent in May compared with April, Eurostat said, and down from 11.6 percent a year before.

"June's data reinforce belief that it is likely to prove a hard slog to get eurozone consumer price inflation back up to the ECB's target rate of close to, but just below 2 percent," said Howard Archer, chief European economist at IHS Global Insight.

"This will be especially the case if events in Greece end up having a major dampening impact on eurozone economic activity, which we doubt will happen although it certainly cannot be ruled out," he said.

The lower inflation rate reversed an upward trend that began after the ECB launched unprecedented stimulus, but plummeting energy costs once again affected the cost of living in the 19-nation currency union, the EU's Eurostat agency said.

"The renewed decline in eurozone inflation in June highlights that the ECB still has a lot of work to do to hit its inflation target in the medium term," said Jennifer McKeown, senior European economist at Capital Economics.

In March, the European Central Bank launched a controversial, more than 1.0 trillion euros, stimulus programme to banish the deflation danger from the eurozone.

Economists fear deflation almost as much as rampant inflation because shoppers tend to put off purchases in the belief they may be cheaper in the future. This leads to ever weaker demand, slowing the economy and pushing up unemployment.

Energy prices continued to tumble however, at negative 5.1 percent, greater than the negative 4.8 percent in May.

The rise in prices was fueled by food and beverages, up by 1.2 percent, followed by services, up 1.0 percent.

Joblessness in the eurozone was lowest in Germany, at 4.7 percent, and the highest in crisis-struck Greece, at 25.6 percent in March, the latest data available.

Youth unemployment in Greece stood at a huge but lower 49.7 percent and remained high in Spain, at 49.3 percent.

EU-wide, unemployment in the 28 member states was also unchanged at 9.6 percent.

Euro area annual inflation down to 0.2% [Eurostat]

Euro area unemployment rate at 11.1% [Eurostat]


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