Tags: Economy

European Recovery Picking Up, but So Is Inflation

Tuesday, 01 Mar 2011 07:12 AM

Europe's economic recovery is picking up steam despite rising oil prices and debt troubles in a number of countries that use the euro, the EU's executive said Tuesday.

However, inflation is also on the rise amid sky-high oil prices due to the turmoil sweeping across the Middle East and North Africa, the European Commission warned.

In the latest projections, economic growth in 2011 is expected to be somewhat stronger than anticipated last autumn despite ongoing difficulties in the financial markets.

For the 17-country eurozone, the Commission is forecasting growth of 1.6 percent this year, 0.1 percentage point higher than previously thought, with upward revisions reported for most countries, notably Germany, whose big exporters continue to benefit from the pickup in global trade. Other countries, like Spain, continue to lag behind.

The recovery from recession across the eurozone may be beginning to show up in unemployment figures. Eurostat, the EU's statistics office, also reported Tuesday that unemployment in the eurozone fell to 9.9 percent in January. That's the first time the rate has been below 10 percent since last March.

But while unemployment is showing tentative signs of falling, inflation is on the rise. Eurostat said consumer prices rose 2.4 percent in the year to February, 0.1 percentage point higher than the previous month.

The figure may have been in line with market expectations but inflation remains above the European Central Bank's target of keeping price increases "close to but below" 2 percent.

In its latest forecasts, the Commission said its inflation projections have been revised up more markedly following the recent surge in energy and commodity prices. It now expects inflation in the eurozone in 2011 to be 2.2 percent, instead of 1.8 percent previously.

The Commission said the economic slack created by the deepest recession since World War II, subdued wage growth and well-anchored inflation expectations will keep underlying price pressures in check.

However, much could hinge on developments in the Middle East and North Africa after uprisings in Tunisia and Egypt brought down longtime leaders and unrest in Libya threatens to end the regime of Moammar Gadhafi.

"Should geopolitical tensions spread further in the region, disruptions to oil supply could not be excluded, fueling oil-price increases beyond what is assumed in this forecast," the Commission said.

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Europe's economic recovery is picking up steam despite rising oil prices and debt troubles in a number of countries that use the euro, the EU's executive said Tuesday.However, inflation is also on the rise amid sky-high oil prices due to the turmoil sweeping across the...
Economy
378
2011-12-01
 

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