Eurozone inflation falls unexpectedly in May: Eurostat

PanARMENIAN.Net - Eurozone price inflation fell unexpectedly in May, increasing the risks of deflation in the currency area and all-but sealing the case for the European Central Bank to act this week.

Annual consumer inflation in the 18 countries sharing the euro fell to 0.5 percent in May from 0.7 percent in April, the EU's statistics office Eurostat said on Tuesday, June 3, according to Reuters.

"The ECB hardly needs any more reason to deliver a major package of stimulative measures at its June policy meeting on Thursday to counter the risk of prolonged very low inflation turning into deflation," said Howard Archer, chief European economist at consultancy IHS Global Insight.

Last month, Reuters quoted sources as saying that the ECB was preparing a package of policy options for its meeting on Thursday, including cuts in all its interest rates and targeted measures aimed at boosting lending to small- and mid-sized firms (SMEs).

"The ECB has consistently underestimated the deflationary forces threatening Europe and now is the time for unconventional monetary policy," said Dominic Rossi, global chief investment officer at Fidelity Worldwide Investment.

Core inflation, excluding energy, food, alcohol and tobacco, fell to 0.7 percent in May from 1.0 percent in April. Energy prices were flat on the year, showing no decline for the first time in five months.

In a sign of the slow economic recovery, a separate Eurostat data release showed the bloc's unemployment dipped marginally to 11.7 percent in April from 11.8 percent, but still near the record high of 12 percent registered a year ago.

Some 18.75 million of people are without jobs in the euro zone - 76,000 less than in March, the Eurostat data showed.

Joblessness has been stuck at almost 19 million people for the last four months and shows the human impact of the worst financial crisis in a generation, but it also varies widely across the euro zone.

The European Commission, the EU executive, said the April unemployment data was a positive sign, but there were many tough challenges ahead on the road towards a significant improvement.

"The EU finally has to turn a vicious circle into a virtuous one, where more people can work, earn, spend and thereby create demand for other people's work too," Laszlo Andor, the EU's commissioner for employment said in a statement.