- Howard Archer, an economist at IHS Global Insight
Although inflation in the Eurozone inched higher in October, it still remains in the ECB's danger zone. Consumer prices in the 18-nation bloc rose as an annual rate of 0.4%, according to a first estimate of October inflation by Eurostat, compared to 0.3% in September. However, core consumer price inflation, which excludes volatile components including energy, food, alcohol and tobacco, dropped to 0.7% in October, down from 0.8% a month earlier. The headline Consumer Price Index has not even crossed the 1% threshold, which is described by ECB President Mario Draghi as a 'danger zone', for the past 12 months and has been constantly falling under the bank's 'close to 2%' targeted levels since January 2013. In addition to that, German and French retail sales dropped sharply in September, raising concerns that business activity in the Euro zone's leading economies struggled to gain momentum at the end of the July-August period. German retail sales in September experienced their biggest monthly drop since May 2007, declining 3.2% in inflation-adjusted terms. In France, consumer spending fell more than expected 0.8% in September from August. Meanwhile, a separate report showed the unemployment rate in the currency bloc remained unchanged in September at 11.5%. The Euro zone's jobless picture is extremely uneven, as the lowest unemployment rates are recorded in Austria and Germany, while Greece and Spain are struggling with the highest once.
© Dukascopy Bank SA