Unemployment across the eurozone fell to a new record low, a week before Europeans head to the polls for the European Parliament elections and the European Central Bank meets to decide on the next move in interest rates.
The unemployment rate in the 20 countries that share the euro currency fell to 6.4 per cent in April from 6.5 per cent in March. The unemployment rate was expected to remain unchanged at 6.5 per cent.
The number of persons out of work decreased by 100,000 from March. Compared to the same period of last year, the number of people out of work fell by 101,000. The youth unemployment rate dropped to 14.1 per cent from 14.3 per cent a month ago.
“The strong job market is helping the economic recovery as it keeps wage growth elevated and has allowed purchasing power to recover after the inflation spike,” Bert Colijn, senior economist, eurozone, at ING, said.
In the meantime, the US economy expanded at a “slight or modest” pace across most regions from early April to mid-May while consumers were not deterred by higher prices, the Federal Reserve reported in its survey of regional business contacts known as the Beige Book.
The survey, published roughly every six weeks, was released on Wednesday as policymakers at the Fed remain uncertain on when to start cutting interest rates after holding them steady in the range of 5.25 per cent to 5.50 per cent for the past 10 months, and are closely watching trends in economic activity, jobs and pricing pressures in order to make their decision.
In the meantime, demand for housing rose and construction increased modestly even as high interest rates continued to constrain lending growth. However, there are still reports of rising mortgage rates affecting sales activity, the report added.
Finally, inflation in Germany increased in May, albeit marginally, highlighting the challenge for the ECB going into its interest rates decision on June 6.
Inflation in Europe’s largest economy rose slightly more than forecast to 2.8 per cent in May from 2.4 per cent in the previous month. Economists had forecast inflation to increase to 2.7 per cent, based on harmonised data to enable comparison with other EU countries.
The increase in German headline inflation is a stark reminder of the difficulty faced by the ECB of the last mile of bringing inflation sustainably back to its two per cent target.
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