The annual rate of inflation in the euro zone fell further below
the European Central Bank's target in July, and to its lowest level
since October 2009.
The decline is a setback to the ECB, which in June launched a
series of measures designed to boost growth and start to move the
inflation rate back towards its goal of just below 2.0%. It is too
soon for those measures to have had an impact, but the further drop
in the rate at which consumer prices are increasing underlines the
severity of the threat confronting policy makers.
Eurostat said consumer prices were just 0.4% higher than in July
2013, as the inflation rate slowed from 0.5% in June. The inflation
rate has now been below 1.0% for 10 straight months.
Figures released by the European Union's statistics agency also
showed that the jobless rate fell to 11.5% in June from 11.6% in
May, reaching its lowest level since September 2012. The number of
people without work fell by 152,000 during June, leaving 18.4
million unemployed.
That was the largest month-to-month decline in the number of
jobless since December 2013.
The decline in the inflation rate is unlikely to prompt an
immediate response from the ECB, which has said it may take as much
as a year for the measures announced June 5 to take full effect.
The central bank had expected the inflation rate to remain around
its June level of 0.5% for some months to come.
Those measures included a cut in the central bank's main
interest rates, as well as a new program of cheap, medium-term
loans to banks that are intended to boost their funding of
businesses.
There are some signs that after a disappointing second quarter,
the euro zone's economy has regained some momentum, with July
surveys of purchasing managers pointing to an increase in
private-sector activity driven by Germany and the services sector.
A monthly survey by the European Commission published Wednesday
found euro-zone businesses were mostly undaunted by growing
tensions between the European Union and Russia over Ukraine's
future.
The accelerating decline in unemployment will likely encourage
ECB policy makers, since it should boost consumer spending over the
coming months, and in turn make it easier for businesses to raise
their prices.
Indeed, figures released by Germany's statistics office Thursday
showed retail sales rose by a surprisingly strong 1.3% in June.
Compared with June 2013, the number of people without work is
down 783,000. Much of that reduction has been down to an
improvement in Spain's jobs market, but unemployment has also been
falling steadily in Ireland and Portugal, while it has remained low
in Germany.
Write to Paul Hannon at paul.hannon@wsj.com
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