Euro zone's inflation rises to 1.5% in March

Euro zone inflation was much higher than expected in March and the unemployment rate reached 10 per cent in February, data showed yesterday, highlighting the fragility of economic recovery. Inflation in the 16-country area was 1.5 per cent year-on-year, the highest since December 2008, after 0.9 per cent in February, the European Union's statistics office said. The data pointed to reawakened price pressure despite low consumer demand. Eurostat's flash estimate for inflation, which contained no monthly figure or any breakdown, compared with the 1.1 per cent price growth expected by analysts polled by Reuters. The March figure was lower than the European Central Bank's target of just below two per cent inflation. Analysts believe the bank will leave its interest rates unchanged until late 2010 or 2011. The euro zone's 10 per cent jobless rate in February was the highest since August 1998 and in line with market expectations. A month earlier unemployment was at 9.9 per cent. The figure pointed to only subdued recovery from the worst economic crisis in decades, with high unemployment curbing consumer spending that is key to reviving the euro zone's economic growth. Sluggish private demand also keeps the lid on price growth. Eurostat said 15.749 million people were unemployed in February in the euro zone, an increase of 61,000 from the previous month. Since February 2009, some 3.1 million people have lost their jobs in the currency area. Unemployment in the whole 27-country European Union was 9.6 per cent, up 0.1 point from January. Unemployment is a lagging indicator as the job market is slow to react to economic developments. Analysts expect the euro zone jobless rate to peak at around 11 per cent in 2010. The lowest jobless rate among euro zone countries was in the Netherlands, at four per cent. Austria's rate was five per cent. Spain, which has been hit hard by the collapse of its construction sector, had the highest unemployment at 19 per cent. Germany, the euro zone's biggest economy, registered the smallest increase in unemployment from a year earlier, rising to 7.5 per cent from 7.3 per cent.