Friday 30 November 2012

Hard times in Eurozone uneployment high

The eurozone's unemployment rate hit a new record high in October,while consumer price rises slowed sharply.
The jobless rate in the recessionary euro area rose to 11.7%. Inflation fell from 2.5% to 2.2% in November.
The data came as European Central Bank president Mario Draghi warned the euro would not emerge from its crisis until the second half of next year.
Government spending cuts would continue to hurt growth in the short-term, Mr Draghi said.
The unemployment rate continued its steady rise , reaching 11.7% in October, up from 11.6% the month before and 10.4% a year ago.
A further 173,000 were out of work across the single currency area, bringing the total to 18.7 million.
The respective fortunes of northern and southern Europe diverged further. InSpain, the jobless rate rose to 26.2% from 25.8% the previous month, and in Italyit rose to 11.1% from 10.8%.
In contrast, unemployment in Germany held steady at 5.4% of the labour force, while in Austria it fell from 4.4% to just 4.3%.
Spending hit
Data earlier this month showed that the eurozone had returned to a shallow recession in the three months to September, shrinking 0.1% during the quarter, following a 0.2% contraction the previous quarter.
The less competitive southern European economies, such as Spain and Italy, where governments have had to push through hefty spending cuts to get their borrowing under control, have been in recession for over a year. But growth in Germany and France came in at a disappointing 0.2%.
More recent data suggests that both core eurozone economies have continued to skirt recession during the autumn.
Retail sales in Germany shrank 2.8% in October versus the previous month, down 0.8% from a year earlier, according to data released on Friday. Analystshad expected the country to record unchanged or moderately growing sales.
Meanwhile, separate data showed consumer spendingin France shrank 0.2% in October versus the previousmonth, with spending on cars and other durable goods hardest hit.
Contraction 'inevitable'
The sharp slowdown in the eurozone's consumer price index , to 2.2% in November, is also symptomatic of the weakness of spending.
However, the inflation data may also open the door to further measures by the ECBto boost the economy, as theindex fell much closer to the central bank's 2% targetrate.
"We have not yet emerged from the crisis," said Mr Draghi, speaking on pan-European radio. "The recovery of the eurozone will certainly begin in the second half of 2013.
"It's true that the budgetaryconsolidation entails a short-term contraction of economic activity, but this budgetary consolidation is inevitable."
Despite Mr Draghi's warning, and the generally poor state of the eurozone economy, markets have begun to take a far more sanguine view of the single currency's future.
Italy's implicit cost of borrowing in the financial markets has fallen to its lowest level in two years, dropping to an implied interest rate of about 4.5% for 10-year debt.
Spain is able to borrow frommarkets at a 10-year rate of about 5.5% - far below the 7%-8% rate being demanded over the summer.
Mr Draghi conceded that the announcement of the ECB's willingness to buy up potentially unlimited amounts of government debt had boosted market confidence, even though noeurozone government had actually taken up the ECB's offer yet.