Disappointing data piles more pressure on European officials

Chris Papadopoullos
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WEAK price pressures in Germany and Spain and a record number of jobless in France has put further pressure on the European Central Bank (ECB) to boost stimulus plans.

Annual inflation dipped to 0.5 per cent in Germany in November, according to official figures released yesterday.

Spain witnessed stronger deflation as prices declined by 0.5 per cent year-on-year in November, below consensus forecasts of a 0.3 per cent drop.

Meanwhile, the number of unemployed workers in France reached a record high.

The jobless total in mainland France climbed 28,400 to 3,460,900 – 5.5 per cent higher than a year ago, official figures reveal.

However, the unemployment rate in Germany October is now 6.6 per cent, the same as in September but lower than a year ago.

“With inflation set to stay far below target in the Eurozone’s largest and arguably strongest economy, they will remain under intense pressure to provide more policy support to tackle the risk of deflation in the region as a whole,” said economist Jennifer McKeown from Capital Economics.

Germany – the Eurozone’s largest economy – narrowly avoided entering recession in the three months to September. Despite Spain’s lower inflation rate, its economy is growing more strongly than Germany’s. It may be a sign that supply-side reforms have reduced prices as well the economy suffering from a lack of spending.

“The labour market reforms that Spain has undertaken over the past couple of years have led to a sizable reduction in unit labour costs and, consequently, consumer prices, allowing Spain to regain cost competitiveness,” said economist Victor Echevarria from BNP Paribas.

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