Euro Zone Inflation, Jobless Rise More Than Expected

Euro zone inflation was much higher than expected in March and the unemployment rate reached 10 percent in February, data showed on Wednesday, highlighting the fragility of economic recovery.

Inflation in the 16-country area was 1.5 percent year-on-year, the highest since December 2008, after 0.9 percent 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 percent price growth expected by analysts polled by Reuters.

The March figure was lower than the European Central Bank's target of just below 2.0 percent inflation. Analysts believe the bank will leave its interest rates unchanged until late 2010 or 2011.

The euro zone's 10 percent jobless rate in February was the highest since August 1998 and in line with market expectations. A month earlier unemployment was at 9.9 percent.

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 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 percent, 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 percent in 2010.

The lowest jobless rate among euro zone countries was in the Netherlands, at 4.0 percent. Austria's rate was 5.0 percent.

Spain, hit hard by the collapse of its construction sector, had the highest unemployment at 19.0 percent.

Germany, the euro zone's biggest economy, registered the smallest increase in unemployment from a year earlier, rising to 7.5 percent from 7.3 percent.