Eurozone unemployment fell to a record low of 7 percent in May, its lowest in over a decade, the European Union's statistics agency said on Tuesday, fanning wage inflation fears in a tight labour market.
Despite being a record low, unemployment in the 13 countries of the euro zone - including Germany, France, Italy and Spain - was still higher than rates of 4.5 percent in the United States and 3.8 percent in Japan in the same month.
The eurozone rate was lowest in the Netherlands at 3.2 percent and highest in France at 8.7 percent, although the EU statistics agency, Eurostat, said the French data could be revised.
Seasonally adjusted unemployment in the countries using the euro touched 7.0 percent, down from 7.1 percent in April. The figure was lower than a forecast of 7.1 percent by economist in a Reuters poll and was the lowest since the data was first gathered in 1996, a Eurostat spokesman said.
New French President Nicolas Sarkozy has vowed to boost growth in the eurozone's second-biggest economy, raising concerns about the pace of cutting the country's budget deficit. The French rate has fallen from 9.6 percent in May 2006.
Unemployment in the full 27-nation European Union was also 7.0 percent in May, down from 7.1 percent in April. Unemployment has long been a weak point of the eurozone, hampering the potential of domestic demand to boost the economy.
But it has declined sharply from 7.9 percent in May 2006. Economists said May's fall was a positive sign for consumer spending. But some cautioned it could fuel inflation in wages, a concern of the European Central Bank, which is expected to raise interest rates again in September.
"At the moment, we're having the best of both worlds, with stronger job growth creation but not enough wage inflation to be concerned. Whether that will continue, we'll have to see," said Sandra Petcov, a European economist at Lehman Brothers.
"(May's data) will reinforce the ECB's concern that tightening labour markets could lead to wages moving significantly higher over the coming months and pushing up inflation over the medium term," said Howard Archer, chief European economist at Global Insight. Separately, Eurostat said industrial producer prices rose 0.3 percent in May in the eurozone compared with April, giving a 2.3 percent increase in year-on-year terms.
In April, the index rose 0.4 and 2.4 percent respectively. Economists had expected a month-on-month increase of 0.3 percent in May and a yearly rise of 2.4 percent. The producer prices index (PPI) is an early sign of inflationary pressure and is closely watched by the ECB. Eurostat said prices in the energy sector increased by 0.5 percent in the eurozone in May compared with April, and intermediate goods also rose 0.5 percent.
Prices of non-durable consumer goods inched up 0.2 percent and capital goods and durable consumer goods rose 0.1 percent. Core monthly producer price inflation, a closely watched measure excluding volatile energy prices, came in at 0.3 percent in May, slowing from a pickup of 0.4 percent in April.