European unemployment rose more than economists expected in January and inflation slowed, adding to arguments for the European Central Bank to cut interest rates more to revive the economy.
The jobless rate in the euro region increased to 8.2 per cent, the highest in more than two years, from 8.1 per cent in December, the European Union statistics office in Luxembourg said today.
The January rate exceeded the 8.1 per cent median estimate in a Bloomberg survey of 25 economists. Inflation eased to 1.1 per cent last month, the lowest since July 1999.
Europe faces the worst recession since the Second World War this year as the global financial crisis curtails exports and investment, forcing companies to cut production and jobs. ECB policy makers have signaled the bank will reduce interest rates
to a record low at their meeting next week to spur lending and boost the economy.
“It’s evident jobless rates will continue to rise, next year in the direction of 10 per cent,” said Martin van Vliet, an economist at ING Groep NV in Amsterdam. “Inflation is no longer a danger anymore.”
With companies and consumers cutting back, the euro region’s manufacturing and service industries unexpectedly contracted at a record pace in February, according to a survey of purchasing managers by Markit Economics. Confidence in the economic outlook is at an all-time low, data yesterday showed.
“Unemployment is a clear concern right now in many parts of the euro area,” ECB President Jean-Claude Trichet said yesterday in Dublin. Labour-market “reforms are very important to counteract the economic downturn and limit its negative impact on employment.”
BASF SE, the world’s largest chemical company, this week said it will accelerate plant closures and eliminate at least 1,500 jobs after deteriorating markets led to its first quarterly loss in seven years.
The Ludwigshafen, Germany-based company expects 2009 sales and operating profit to decline.
Reuters