Euro-Zone Inflation Confirmed at 1.2%, Employment Contracts at Record Pace
Euro-Zone February HICP inflation was confirmed at 1.2% y/y, unchanged from the preliminary number and up from 1.1% y/y in January. Prices were up 0.4% m/m mainly due to seasonal price increases for good and recreation and culture, but also a 0.5% m/m rise in energy prices. Core inflation, excluding the most volatile items food and energy, accelerated to 1.7% y/y from 1.6% y/y. This is still clearly below the ECB's 2% upper limit for price stability, but nevertheless much higher than the headline rate, which supports the ECB's view that the rapid decline in inflation is due to base effects from energy prices and not a sign of serious deflation risks.
Meanwhile, Euro-Zone Q4 employment declined 0.3% q/q, after already falling 0.1% q/q in the previous quarter. Employment was unchanged compared to the corresponding quarter in the previous year, after rising 0.6% y/y in Q3. The sharpest decline of 2.1% q/q was registered in Spain, which is suffering from the collapse of the housing market and construction sectors. Employment is likely to slow down further as investment and export demand are breaking off and the rise in unemployment will weigh on consumption trends and overall growth in the foreseeable future. It should also help to keep a lid on wages growth.