Eurozone inflation slows amid economic cool-down fears

BRUSSELS. Inflation in the Eurozone slowed in March, data showed on Monday, amid worries that the European economy is cooling as the effects of Brexit finally take a toll.

The slowdown of inflation comes as signs are multiplying of slower economic growth, especially in powerhouse Germany and the bloc’s second-biggest economy, France.

The rise in consumer prices was less than analyst expectations and dipped away from the European Central Bank’s target of close to, but just below 2.0 per cent.

Closely tracked core inflation, which strips out volatile energy prices, dropped to 0.8 per cent, in a sign that demand is stalling in Europe.

“The overall picture of bleak core inflation remains,” said Bert Colijn, senior economist at ING.

Indications of a weak first quarter for the Eurozone mounted as a closely-watched survey pointed last month to March output being dragged further down by manufacturing weakness.

Manufacturers in the 19-nation single currency bloc “reported their steepest downturn for six years” as pressure mounted from trade wars and Brexit fears, data company IHS Markit said on March 22.

This as the ECB added to growth worries when its chief Mario Draghi hinted that interest rates would stay low for longer than previously anticipated, to stimulate growth and inflation.

Capital markets analyst Jack Allen said some of the inflation drop could be explained by technical effects, “so the continued weakness in the manufacturing PMIs (Purchasing Managers’ Index) will be a bigger worry for the ECB.”

The unemployment rate in the Eurozone meanwhile remained stable at 7.8 per cent in February, its lowest level since October 2008, the EU’s Eurostat said on Monday.

Unemployment in the Eurozone has fallen steadily since September 2016, when it dropped below the symbolic threshold of 10.0 per cent.

It is now near the average rate heading into the 2007-2008 financial crisis, when it stood at 7.5 per cent.

Among the 19 countries that have adopted the single currency, the lowest unemployment rate in February was recorded in Germany at 3.1 per cent and the Netherlands 3.4 per cent.

The highest rates were recorded in Greece at 18.0 per cent in December 2018, the latest data available, and Spain at 13.9 per cent.

Across the 28 countries of the European Union, the unemployment rate stood at 6.5 per cent in February.