The number of people without jobs across the 17 countries that share the euro fell in October by the largest amount since April 2011, while the annual rate of inflation picked up in November, although it remained well below the European Central Bank's target level.
The European Union's statistics agency said Friday the euro zone's unemployment rate fell to 12.1% in October from 12.2% in September—which was a record high—and the annual rate of inflation rose to 0.9% in November from 0.7% in October. The ECB targets an inflation rate close to, but below 2.0%.
Both developments will ease concerns that the currency area is at risk of entering a period of deflation—or falling prices—as a result of weak consumer demand and low levels of bank lending.
However, those concerns haven't entirely abated. Figures also released Friday showed German retail sales fell in October, indicating that business on the high streets has remained slack ahead of the Christmas season. And in France, consumer spending slid. And despite the decline in unemployment during October, consumer confidence across the euro zone weakened in November.
"The overall assessment remains that inflation is very low, with downward pressure on markups and costs throughout the euro zone," said Marie Diron, senior economic adviser to Ernst & Young. "We think that the ECB needs to recognize the risk of deflation more clearly and act pre-emptively."
ECB officials have this week played down the prospects for dramatic steps to boost inflation and growth. In an interview with the Nikkei newspaper while on a visit to Japan, ECB executive board member Benoit Coure said deflation isn't a threat, although the inflation rate will remain "far away" from the target.
He also said the central bank shouldn't resort to quantitative easing, as the U.S. Federal Reserve and the Bank of England have done.
"Outright asset purchases is one of the tools that the ECB can use to implement its monetary policy, so it is in principle possible," he said. "I don't think this is warranted given the current prospects for inflation."
Eurostat said the number of people without jobs fell by 61,000 in October, largely driven by a decline of 41,000 in France, the currency area's second-largest economy. However, 19.298 million were without jobs, 615,000 more than in the same month last year. The rate of unemployment last fell in January 2011.
The decline in the unemployment rate was a surprise, since 20 economists surveyed by The Wall Street Journal last week had expected it to be unchanged. But it remains very high by international standards. In the same month, the unemployment rate in the U.S. stood at 7.3%.
Within the euro zone, unemployment rates differed hugely, with Austria recording the lowest at 4.8%, and Greece the highest at 27.3%, although that figure was for August, the most recent month for which figures are available.
"Growth is no where near strong enough to make serious inroads into the jobless totals, particularly in the peripheral countries where unemployment is highest," said Jonathon Loynes, chief European economist at Capital Economics.
The rate of unemployment among people aged 24 or younger remains much higher than the rate for the population as a whole, and rose in October to 24.4% from 24.3%. Youth unemployment rates were particularly high in countries that have been worst affected by the euro zone's fiscal and banking crisis. In Spain, the youth unemployment rate rose to 57.4% from 56.8% in September.
The euro-zone economy returned to growth in the second quarter, having contracted for the previous 18 months. It slowed in the third quarter, and some business surveys have indicated it won't quickly rebound.
However, a measure of activity released Friday suggests there may be a slight pickup in growth during the final three months of the year.
Italy's central bank and the London-based Center for Economic Policy Research said their Eurocoin indicator rose to 0.23 in November from 0.20 in October, its third month of registering economic growth.
The Eurocoin indicator is intended to estimate quarter-to-quarter growth in GDP, excluding erratic components such as seasonal variations and short-run volatility.
