Eurozone Economy: The Good, The Bad, and The Ugly
Two economic records took place in the eurozone Wednesday, one new and one old — one good news, and the other bad. Let’s get the bad news over with first. The unemployment rate, while now holding steady and not drifting up any farther, is showing a record jobless rate of 12.1 percent of the zone’s work force. This marks the eight months in a row with unemployment so high, according to Reuters.
On top of that, the inflation in the eurozone fell to 0.8 percent in December — bad news for the European Central Bank who has a target of just below 2 percent, but has been struggling to attain it. December was the third month and counting in which the inflation fell under 1 percent. This is considered a warning area for possible future deflation, so said the ECB, according to Reuters.
“Today’s euro zone data releases provide some ammunition for the hawks on the ECB’s governing council in making the case against further easing measures at tomorrow’s ECB policy meeting. With a sustainable recovery not yet assured — this is still very much a jobless recovery,” said Martin van Vliet, an economist with ING Bank, according to Reuters.
Now for the good news. According to a Bloomberg Businessweek report, economic data has shown the largest jump in monthly retails sales seen in twelve years. A Eurostat report said that the retail trade volume had gone up by 1.4 percent in the eurozone. The country showing the largest retail trade contribution was Portugal, with Luxembourg just below.
“Strengthening consumer confidence and the help to purchasing power coming from muted inflation across the euro zone will increasingly underpin consumer spending and help economic activity to gradually gain momentum in 2014,” Howard Archer, economist with IHS Global Insight, told Bloomberg. Archer revealed the way in which low inflation — though not what economists were hoping for, can have convenient side effects.