March 31 (Bloomberg) -- European inflation accelerated more than economists forecast on higher oil prices, while the unemployment rate reached double-digits for the first time since 1998.
Consumer prices in the 16-nation euro region increased 1.5 percent in March from a year earlier, after a 0.9 percent gain in February, the European Union statistics office in Luxembourg said today. That is the fastest inflation since December 2008 and topped the median forecast of 1.1 percent in a Bloomberg survey of 36 economists. Unemployment rose to 10 percent in February, the highest rate since August 1998, a separate report showed.
Even as oil prices are pushing up inflation across Europe, rising unemployment and weak demand may curtail consumer spending and make it harder for companies to pass on higher costs. European Central Bank President Jean-Claude Trichet said today that it was “extremely important to anchor inflation expectations.”
“It’s a spectacular rise but the level is still quite low, below the ECB’s price-stability goal,” said Nick Kounis, chief European economist at Fortis Bank in Amsterdam. “Certainly if, as we suspect, some of the rise is temporary and inflation settles closer to 1 percent, then there’s good reason to think the ECB’s facing quite subdued inflation trends.”
Extended Gains
The euro extended gains against the dollar after the data, trading at $1.3465 at 11:07 a.m. in London, up 0.4 percent on the day.
The ECB on April 8 will probably keep its benchmark interest rate at a record low of 1 percent, according to a Bloomberg survey of economists. Interest rates are seen on hold until the first quarter of 2011, the survey shows.
“The headline inflation rate is probably close to a peak and will fall back down to below 1 percent later on in the year, and could even get quite close to zero,” said Ben May, an economist at Capital Economics in London.
Europe’s economy may struggle to gain momentum after expanding just 0.1 percent in the fourth quarter as a 66 percent surge in oil prices over the past year leaves companies and consumers with less money to spend. Siemens AG, Europe’s largest engineering company, said on Jan. 28 that it will cut 1,990 jobs in Germany as demand drops. Gianni Versace SpA plans job cuts in Italy, the company said on Jan. 29.
The unemployment data were in line with the median forecast in a Bloomberg survey of 32 economists. The highest unemployment rate in the euro region, at 19 percent, was in Spain, where joblessness among the under-25s amounted to 40.7 percent, the report showed. The jobless rate was 7.5 percent in Germany and 10.1 percent in France.
Today’s inflation report is an initial estimate and the statistics office will release a breakdown of March inflation on April 16