* Inflation at 2.2 pct in November vs same month a year ago
* Employment rate down by 0.2 pct in Q3 vs Q2
By Robin Emmott
BRUSSELS, Dec 14 Europeans' reluctance to spend
on travel and eating out slowed increases in the cost of living
in the euro zone in November, abbetted by a deteriorating
ability of the economy to generate jobs.
Business surveys, meanwhile, pointed to a continued
contraction in the economy.
Annual inflation in the 17 countries sharing the euro was
2.2 percent in November, the EU's statistics office Eurostat
said on Friday, falling to just above the European Central
Bank's target and ending months of sharp price rises.
While good news for households struggling through the euro
zone's public debt and banking crisis, the cooling inflation
also underscores the stagnant economy where business is so slack
that companies cannot pass on price increases to customers.
Employment in the single currency area also fell 0.2 percent
in the third quarter from the second, Eurostat said, showing a
worsening of the bloc's job rate since the summer in Europe.
The bloc's 9 trillion euro economy slipped into its second
recession since 2009 this year and policymakers are divided over
whether it will rebound quickly, or at all, in 2013.
Data researcher Markit said it purchasing managers indexes
for the fourth quarter were compatible with continued
contraction, even though there was some improvement in the
Many economists expect the ECB to cut its main lending rate
to below 0.75 percent early in 2013 to try to revive the
economy, but with the cost of borrowing already at a record low,
such a move may not have much of an impact.
The slight improvement in the PMI manufacturing and services
data may also deter the bank from cutting interest rates
"There may be one last chance for a cut of the refinancing
rate, but the ECB doesn't have much ammunition left unless it is
prepared to cut its deposit rate to below zero," said Nick
Kounis, head of macroeconomic research at ABN AMRO.
A cut in the deposit rate, which is now at zero, would
charge banks for keeping funds with the ECB, encouraging banks
to lend money and freeing up money for smaller businesses.
"There is a more significant hurdle compared to traditional
policy because it's not something you do lightly," he said.
At its last meeting on Dec. 6, the ECB's Governing Council
touched on the idea of taking its deposit rate into negative
territory but did not elaborate.
Still, the ECB does have more room to manoeuvre now that
inflation is coming down after peaking at 3 percent a year ago.
French inflation eased more than expected in November to the
lowest in over two years, while inflation in Greece, which is
sunk in an economic depression, was just 0.4 percent.
Household spending in euro zone, constrained by government
cuts and record unemployment, was mainly limited to food and
clothing in November and overall, consumer price inflation fell
0.2 percent from October.
The cost of transport, recreation, culture and eating out at
restaurant costs all slipped in the month, while package
holidays fell 2.4 percent.
Stripping out energy inflation, consumer prices rose 1.4
percent, well below the ECB's target of just below 2 percent.
Even the cost of energy, which for most of 2012 was driven
up by high world oil prices over tensions between the West and
Iran's nuclear programme, slid by more than expected in November
from October and could fall further.
"Over the coming months, we expect energy inflation to
moderate further," said Gizem Kara, an economist at BNP Paribas.
Worries about the impact of possible impact of steep tax
increases and spending cuts in the United States, as well as the
euro zone's stalled economy, have capped the price of Brent
crude, which traded at $109 a barrel on Friday.
That is down from near $120 a barrel in August.