Eurozone Inflation Steadies At 5.3%; Unemployment Rate At Record Low

(RTTNews) - Eurozone inflation ceased to slow in August on energy prices but underlying inflation eased due to the slowdown in goods and services price growth, flash data from Eurostat showed on Thursday.

The unemployment rate in the currency bloc held steady at a record low in July suggesting that wage growth is set to remain strong, another data from Eurostat revealed today.

EU harmonized inflation remained unchanged at 5.3 percent in August, while the rate was forecast to slow to 5.1 percent. The 5.3 percent was the lowest since January 2022.

Excluding energy, food, alcohol and tobacco, core inflation slowed to 5.3 percent, in line with expectations, from 5.5 percent a month ago.

Among components of the harmonized index of consumer prices, energy prices dropped for the fourth straight month. Prices decreased 3.3 percent, slower than July's 6.1 percent fall.

Food, alcohol and tobacco prices gained 9.8 percent after a 10.8 percent rise. Similarly, growth in non-energy industrial goods prices slowed to 4.8 percent from 5.0 percent. Services cost was up 5.5 percent, which was weaker than July's 5.6 percent increase.

Although inflation remains stubborn enough to make European Central Bank hawks uncomfortable, it does look like a further deceleration in inflation is in the making for the months ahead, ING economist Bert Colijn said.

The economist expects another quarter point hike at the September meeting.

The ECB has raised its rates by a cumulative 375 basis points with hikes in every policy session of the current tightening cycle that began in July last year. The minutes of the July meeting is due later today.

Another data from Eurostat today showed that the unemployment rate held steady at 6.4 percent in July as expected.

Compared to June, unemployment increased by 73,000 from a month ago. The annual increase was 264,000. The youth jobless rate was steady at 13.8 percent in July.

With wage growth still strong, it will be a long time before services inflation falls to a level consistent with the ECB hitting its inflation target, Capital Economics' economist Jack Allen-Reynolds.