Eurozone unemployment improves, producer prices subdued

Unemployment in the euro-zone shrank in February, official data confirmed on Monday.

A 140,000 fall in the number of unemployed people nudged unemployment rate down to 9.5% from 9.6%, said Eurostat, the statistical office of the European Union.

This was in line with the consensus forecast from economists.

There continued to be a marked divergence between countries, with Germany and France flat, but Spain and Italy's rates improving to still-high levels.

Eurostat also published data on February’s producer prices index, showing a flat month-on-month figure, when a 0.3% rise had been expected after January's 1.1% increase.

Compared to February last year, producer prices were up 4.5%, beating consensus expectations of 4.4% and up from the 3.9% rise in January.

The data confirmed that underlying inflation pressures are subdued, said continental specialist Jennifer McKeown at Capital Economics.

"The downward trend in euro-zone unemployment, which has been underway for four years, points to some pick-up in annual wage growth from Q4’s 1.6%. But given remaining spare capacity in the labour market, the increase is set to be modest."

Elsewhere, IHS Markit reported that its euro-zone manufacturing PMI index rose to 56.2 in March from 55.4.

McKeown said the PMI data looked consistent with a strong pick-up in annual industrial production growth from January’s 0.6% to as high as 4%.

"In all, then, more encouraging evidence about the euro-zone economy, which we now expect to grow by about 2% this year. But the recovery still doesn’t seem to be putting much upward pressure on inflation, so the ECB should be able to carry."