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European Inflation Jumps to 20-Month High, Jobless Holds at 10%
European inflation accelerated to the fastest pace in more than 1 1/2 years on rising energy costs and unemployment held at the highest in almost 12 years.
Euro-area consumer prices rose 1.7 percent from a year earlier in July after increasing 1.4 percent in June, the European Union statistics office in Luxembourg said today. That’s the fastest inflation since November 2008 and in line with the median forecast of 33 economists in a Bloomberg News survey. The jobless rate remained at 10 percent for a fourth month in June, the statistics office said in a separate report. That’s the highest since August 1998.
European companies may have more scope to raise prices and add workers over the coming months as the economy shows signs of weathering a stronger euro and the Greece-led fiscal crisis. Economic confidence rose to the highest in more than two years in July and German unemployment declined, data this week showed. Volkswagen AG, Europe’s biggest carmaker, yesterday reported its biggest quarterly profit in two years.
“The pace of job-shedding has probably come to a halt,” said Chiara Corsa, an economist at UniCredit Group in Milan. Still, “we see the boost from both exports and inventories gradually fading throughout the second half of the year, with domestic demand unlikely to take up the baton.”
Some 15.8 million people within the 16-nation euro region were unemployed in June, up 6,000 from May and 788,000 higher than the year-earlier month. In the 27-member EU, unemployment held at 9.6 percent in June. Spain had the highest jobless rate in the EU at 20 percent.
Energy Prices
Today’s July inflation report is an initial estimate and the statistics office will release a breakdown including the core rate on Aug. 16. In June, core inflation, which excludes volatile energy prices, accelerated to 0.9 percent from 0.8 percent.
Royal Dutch Shell Plc, Europe’s largest oil company, yesterday posted a 15 percent increase in second-quarter profit helped by higher oil prices. The company, based in The Hague, has cut more than 5,000 jobs to reduce costs.
Crude-oil prices have increased 3 percent over the past month just as the euro’s recent advance is adding pressure on companies to cut prices by making exports less competitive abroad. The single currency has gained 6.5 percent against the dollar this month, paring annual losses to 9 percent.
Rising export orders probably helped the euro-area economy gather strength in the second quarter after it expanded 0.2 percent in the previous three months. European industrial orders rose for a fourth month in May and growth in the region’s services and manufacturing industries accelerated in July.
Profit Outlook
Volkswagen said yesterday that second-quarter net income quadrupled on a 22 percent jump in revenue. Siemens AG, Europe’s largest engineering company, which is in the process of cutting 4,900 jobs at its industry-solutions division, on the same day raised its full-year profit outlook.
With governments stepping up efforts to rein in budget deficits and the global economy showing signs of losing momentum, a recovery may be slow to feed through to employment.
“We’re past the most difficult phase, but we can’t expect any strong improvement on the labor market anytime soon,” said Christian Melzer, an economist at Dekabank in Frankfurt. “The production levels aren’t sufficient yet for companies to add workers to a large extent.”
To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net
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