In October, the euro zone unemployment rate rose unexpectedly, already for a third consecutive month! The unemployment rate increased from 10.2% to 10.3%, a new cyclical high and the highest level since June 1998. Compared with the previous month, the number of people unemployed rose by 126 000 in the euro area and from a year ago, the unemployment increased by 367 000. The lowest unemployment rates were registered in Austria (4.1%), Luxembourg (4.7%) and the Netherlands (4.8%) and the highest in Spain (22.8%) and Greece (18.3% data from August). Youth unemployment (under 25s) jumped to 21.4% in the euro zone (from 20.6% in October 2010). In Spring, the euro zone unemployment rate dipped below 10%, but the spreading debt crisis and sharp slowdown in growth are pushing the unemployment rate again up. As growth is slowing further and a new recession becomes ever more likely, the unemployment rate will continue to rise over the coming months.
According to the first estimate, euro zone HICP inflation stayed unchanged at 3.0% Y/Y in November, for a third consecutive month. The outcome was in line with expectations. Details will only be provided with the final reading. The persistently high rate of inflation might be somewhat disappointing for the ECB, but as the economic climate is weakening further and a new, probably mild, recession is ever coming closer, we believe that it won’t refrain the ECB from cutting rates, probably already next week. For December onwards, inflation will probably start to decline and might reach fall back to 2% around the middle of next year.