In January, the euro zone unemployment rate rose unexpectedly. The unemployment rate jumped from an upwardly revised 10.6% (earlier reported as 10.4%) to 10.7%, while the consensus was looking for stabilization at 10.4%. Eurostat estimates that the number of people unemployed rose by 185 000 in the euro area in January, to a total level of 16.925 million. The highest unemployment rates were observed in the Spain (23.3%), Greece (19.9% in November), Ireland and Portugal (both 14.8%). The youth unemployment rate (under 25) was 21.6% in the euro zone. The euro zone unemployment rate is now at the highest level since October 1997 and is just 0.2% below its all time high, suggesting that a jump above the all-time highs is not excluded in the coming months.
The final figure of February euro zone manufacturing PMI confirmed the first estimate, which showed a slight increase from 48.8 in January to 49.0. National data show that Greek manufacturing PMI plunged to a record low (37.7 from 41.0), while the Spanish one dropped slightly (45.0 from 45.1) and Italian manufacturing PMI rebounded from 46.8 to 47.8. While activity continues to contract steeply in those three countries, activity is stabilizing in Ireland (49.7 from 48.3), France (50.0 compared to a first estimate of 50.2), Germany (52.0 up from a first estimate of 50.1) and the Netherlands (50.3 from 49.0). Only in Austria, manufacturing activity grew in February. Both new orders and new export orders continued to contract, but at a slower pace. Input prices rose sharply in February, due to higher energy costs, while employment contracted at the same pace as in the previous month. In Germany however, the trend in job creating eased sharply to the weakest in two years. The breakdown for the manufacturing sector is not as bad as only the Greek manufacturing PMI weakened sharply. Nevertheless, there remain considerable hurdles for the euro zone economy and a further improvement is probably needed in March to avoid a new recession.
After a downward revision in January CPI inflation, the first estimate of euro zone February inflation showed an upward revision. CPI picked up from 2.6% Y/Y to 2.7% Y/Y, while an unchanged figure at 2.6% Y/Y was expected. Most of the upward surprise was probably based in energy after the oil prices rose sharply over the previous month.