Eurozone Inflation Subdued as Unemployment Rises

       

Consumer prices in the eurozone barely rose from a year earlier in July, while the number of people without work increased in June, both signs that the European Central Bank's bond purchase program has yet to have its desired effect.
        After a long, steady decline in the inflation rate, consumer prices first fell below their year-ago levels in December. The next month, the ECB announced the launch of a program of quantitative easing, under which it would buy more than ˆ1 trillion ($1.1 trillion) of mostly government bonds. It launched the program in March.
        Eurozone consumer prices rose for the first time in six months during May, a victory for the ECB in its campaign to avoid a debilitating period of deflation, during which businesses and households might hold back on spending in the expectation that they will get better deals in the future.
        But the annual rate of inflation fell back in June, and was unchanged in July. That will increase speculation that the ECB may have to extend its bond purchases beyond a tentative completion date of September 2016. Earlier this week, the International Monetary Fund said it expects the inflation rate to remain below the ECB's target of just under 2% through 2020, and that it is likely policy makers will have to expand the stimulus program, which is known as quantitative easing.
        The European Union's statistics agency Friday said consumer prices in July were 0.2% higher than a year earlier, well below the ECB's target of just under 2%.
        Inflation was restrained by a renewed fall in energy prices, which were down 5.6% from a year earlier. But there were signs that the prices of other goods and services are slowly starting to rise. Excluding prices for energy, food and alcohol that are largely beyond the ECB's influence, the core annual rate rose to 1.0% from 0.8%.
        While the eurozone's modest recovery likely continued in the second quarter, it is proceeding at too weak a pace to quickly lower very high rates of unemployment and give a stronger boost to domestic demand, which would in turn help push prices higher.
        Eurostat Friday said the number of people without jobs in the 19 members of the eurozone actually rose in June, by 31,000, while the jobless rate was unchanged at 11.1%. Italy was responsible for the rise in unemployment, as its jobless rate increased to 12.7% from 12.5%. But Greece had the highest unemployment rate, recorded at 25.6% in April, the most recent month for which figures from that country are available.
        Write to Paul Hannon at paul.hannon@wsj.com
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        (END) Dow Jones Newswires

        July 31, 2015 05:20 ET (09:20 GMT)

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