Eurozone unemployment was flat at 10 percent for the fourth month running in June and inflation remained muted in July, boosting the case for the fragile economic recovery to be nursed with low interest rates. European Union statistics office Eurostat said inflation in the 16-nation currency area edged up to 1.7 percent year-on-year in July from 1.4 percent in June, in line with economists' expectations and comfortably below the European Central Bank's target of just under 2 percent.
The inflation figure strengthens expectations that the ECB will keep its main interest rate unchanged at an historic low of 1.0 percent into 2011, especially as the recovery is modest and could still falter. "There remains a compelling case for the ECB to keep interest rates down at 1.0 percent not only through 2010 but deep into 2011, given that eurozone growth remains at risk from tightening fiscal policy in a number of countries and a loss of momentum in global growth," said Howard Archer, chief Europe economist at IHS Global Insight.
Jennifer Mckeown, Europe economist at Capital Economics, said: "July's increase in eurozone inflation probably reflected developments in energy and food prices, while underlying inflation remains extremely subdued. The flat unemployment rate is the latest in a string of indicators that have shown the eurozone continues to recover from the worst economic crisis in decades, despite turbulence on sovereign debt market and uncertainty about the health of banks.
Eurostat said 15.771 million people were jobless in the eurozone in June, 6,000 more that in May. In Germany, the eurozone's biggest economy, unemployment was unchanged at 7.0 percent, after falling in May. But German subsidies that have kept many workers employed will start expiring later this year, possibly boosting the jobless count.
Unemployment fell in Italy to 8.5 percent from 8.6 percent and increased in France to 10 percent from 9.9 percent. Spain, where the construction sector has collapsed after years of overheating, saw unemployment rise to 20 percent from 19.8 percent.
The lowest rates were recorded in Austria and the Netherlands - 3.9 percent and 4.4 percent respectively. Deep differences in unemployment rates pose question mark over the ECB's interest rate policy, some analysts say. No detailed breakdown or monthly data was available with Eurostat's so-called flash estimate, but the June figure is likely to have been dampened by slower-than-expected price growth in the eurozone's biggest economy, Germany. German consumer prices rose 1.1 percent on an annual basis in July, preliminary data from the Federal Statistics Office showed on Monday, easing from a 0.9 percent rise in June.