Euro Zone Inflation off 3-Year Lows, Employment Woes Deepens


Prices of electricity, fruit and vegetables lifted the euro zone inflation off its three-year low in May, while the single currency bloc's record high jobless rate showed in its deepening inability to create jobs in the first quarter.

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Economic recovery in the euro area is expected to kick in later this year, but risks to the growth are on the downside as governments continue with painful fiscal consolidation and companies struggle to access credit in banks.

Consumer prices rose by 0.1 percent on the month in May, the EU statistic agency Eurostat said, putting the annual inflation rate at 1.4 percent compared to 1.2 percent in April.

Inflation in the euro zone's strongest economy, Germany, jumped to 1.6 percent on the year in May from 1.1 percent in April, while France recorded only a small increase and Italy stayed flat at 1.3 percent.

Euro zone inflation has declined markedly over the last few months and is well under the European Central Bank's (ECB) target of close to, but below 2 percent. The bank said in June it sees inflation risks as broadly balanced.

The ECB left key interest rates unchanged in May, slightly lowered its growth outlook and discussed a raft of other policy options it could take if the euro zone economy does not emerge from recession later this year.

The euro zone's malaise was clearly visible in a 0.5 percent drop in employment first three months of the year, Eurostat data showed, reflecting the unemployment rate that reached a new high in April, with 19.4 million people out of work.

(Reporting by Martin Santa; editing by Rex Merrifield)