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Eurozone core inflation sags to lowest level in two years

Eurozone core inflation sags to lowest level in two years

Unemployment continues to fall across bloc as a whole despite Italian rise

Core inflation in the eurozone has hit its lowest level for two years, amid mounting signs that the single currency area’s economy is losing momentum.

Eurostat, the bloc’s statistics agency, said the core measure, which strips out more volatile price changes for energy and food products and is seen as a better measure of underlying price pressures, fell from 1 per cent to 0.8 per cent in the year to March.

The headline measure also fell slightly, from 1.5 per cent in the year to February to 1.4 per cent last month.

The fall means core inflation is now at its lowest level since March 2017 and comes amid mounting signs that the region’s economic expansion is at risk from weaker global demand and tumult in global politics.

A closely watched poll of purchasing managers showed manufacturers’ woes had intensified, especially in Germany, the region’s economic powerhouse.

The IHS Markit Purchasing Managers’ Index for the eurozone hit 47.5 in March — the lowest level in six years and well below the crucial 50 level which marks the boundary between expansion and contraction.

The European Central Bank’s governing council is set to meet in Frankfurt next Wednesday, though it is not expected to announce any additional measures just yet having laid out a series of new policies in March.

Separate data released on Monday showed the eurozone’s job market had continued to improve in February, thanks to a falling number of jobseekers in Spain, Germany and France, while unemployment rose in Italy.

In February, there were 77,000 fewer unemployed people than in the previous month, a reduction of nearly 1.2 million compared to the same month last year, according to data from Eurostat.

However, the overall positive trend for the region masks diverging trends, particularly between fast improvements in Spain and a deterioration in the Italian labour market.

“February unemployment data continues to highlight the diverging fortunes of the two Mediterranean countries” said Angel Talavera, economist at Oxford Economics.

“While unemployment in Spain remains higher, the direction of travel is clearly positive. Meanwhile, along with a stagnating economy, employment growth has halted in Italy.”

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