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Inflation

Eurozone inflation near five-year low as unemployment remains high

The inflation rate in the eurozone continues to drop and almost hit a five year-low in August. At the same time, the jobs crisis isn't easing, adding to pressure on the European Central Bank to do more to spur growth.

The European Union statistics office, Eurostat, Friday released a preliminary inflation figure for August, showing a drop in the rate to 0.3 percent from 0.4 percent in July.

Eurostat data showed that prices for services went up most significantly, rising 1.2 percent compared with the same month last year, and were followed by those for industrial goods, which were up by 0.3 percent. Overall inflation, however, dropped because of substantially lower energy prices, which were down by 2 percent in August, compared to the year before. Food prices also fell.

Deflation -when everything gets cheaper

August inflation was the lowest for a single month since October 2009, when it was 0.1 percent. It is also far below the inflation target of the European Central Bank, which considers a rate of around 2 percent as guaranteeing price stability.

Consumers may like low inflation because it keeps their purchasing power stable. But for economists it's a sign of weak demand in the eurozone that may threaten a fragile recovery earlier this year.

Unemployment rate unchanged

Such fears are compounded by the latest unemployment figure for the currency area also released by Eurostat on Friday. Statisticians reported a jobless rate of 11.5 percent in July - unchanged from June, and the lowest since September 2012.

But the rate is high, exceptionally high even, in some countries such as Spain, Greece and Italy. Moreover, the eurozone jobs crisis has begun to hit France, as growth in Europe's second largest economy has come to a standstill in recent months.

Both low inflation and high unemployment, will continue to worry the European Central Bank (ECB), which has slashed interest rates to an historic low to spur lending and, thus, growth in the eurozone.

ECB governors are meeting next Thursday, and some experts believe it will launch a large-scale asset-buying program to pump fresh money into the economy. Other experts think, however, that the central bank will hold off for several more months as it waits for earlier stimulus measures to take effect.

uhe/ng (dpa, AP, Reuters)

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