Inflation decreases while unemployment rate remains unchanged: an increasingly dangerous scenario

Euro area inflation expected at 0.7 percent while unemployment rate decreased MoM – but increased YoY

The first decreased, getting more and more worrisome, the latter is unchanged, and that’s even more worrisome.

Euro area annual inflation is expected to be 0.7 percent, while the seasonally-adjusted unemployment rate was unchanged at 12%, according to Eurostat.

After its 0.8 percent value in December, inflation was expected to increase slightly (yet healthily) in January. Which it did not. The ECB is thus under increasing pressure by the ghost of deflation, which frightens more and more people – the value is by far lower than “about 2 percent, just a little bit less”, the more suitable according to numerous economits and the ECB itself. It would in fact indicate an economy which consumes – hence produces.

Dealing with unemployment, several politicians welcomed the decrease by 129,000 of the number of persons unemployed: it actually is the first significant decrease after a long upward trend. Yet, it is just a droplet in the ocean: 19,100 million men and women were unemployed – 130,000 more than in December 2012, even though there was a slight decrease from the peak registered in September 2013 (12.1 percent).