January 8, 2014 / 12:25 PM / 4 years ago

UPDATE 1-Euro zone unemployment holds at record high, retail sales rebound

* Nov unemployment flat at record 12.1 percent for 8th month
in row
    * Retail sales show strongest monthly rise in 12 years in
    * Recovery yet to affect labour market, price pressures low

    By Martin Santa
    BRUSSELS, Jan 8 (Reuters) - Euro zone retail sales leapt in
November even though unemployment remained at a record high,
hinting at a pick up in consumer demand that would ease
deflation worries and relieve pressure on the ECB to loosen
    Data on Wednesday showed the biggest monthly jump for 12
years in retail sales, a proxy for household demand that has
been weakened across the bloc by high rates of unemployment.
    The improvement came even though record joblessness
persisted, with 12.1 percent of the bloc's labour force out of
work for the eighth month in a row in November.
    Data on Tuesday had shown a surprise drop in euro zone
inflation to 0.8 percent in December, well below the European
Central Bank's target of just under 2 percent. It was the third
month in a row in which the reading was below 1 percent, a level
the ECB, which holds its monthly monetary policy meeting on
Thursday, considers a danger zone for deflation.   
    "Today's euro zone data releases provide some ammunition for
the hawks on the ECB's governing council in making the case
against further easing measures at tomorrow's ECB policy
meeting," said ING Bank economist Martin van Vliet.
    But he added: "With a sustainable recovery not yet assured -
this is still very much a jobless recovery - ECB President
Draghi, in his press statement, will likely keep the door to
further easing wide open."    
    Retail sales in the 17 countries using the euro rebounded
1.4 percent in November after a 0.4 percent decline in October, 
the fastest monthly increase since November 2001.
    Compared with the same period last year, the volume of sales
rose 1.6 percent after a 0.3 percent fall in October, delivering
the strongest rise since February 2008.
    The number of people out of work in the euro zone was 19.241
million, 4,000 more than in the previous month, the European
Union's statistics office Eurostat said.
    Unemployment was lowest in Austria, at 4.8 percent, and
Germany, at 5.2 percent, while the highest rates of joblessness
were in Greece, at 27.4 percent, and Spain at 26.7 percent.
    The number of people out of work in Europe has been rising
since 2011. The European Commission said on Wednesday that in
addition to national reforms, the 28-nation EU had to integrate
further economically, fiscally and politically to address the
    "Without these further steps uncertainty could return sooner
than we think and today's recovery could quickly dissipate,"
European Commissioner for Employment, Social Affairs and
Inclusion László Andor wrote in a comment to the data.
    Retail sales rose strongly in the euro zone's two largest
economies, Germany and France, by 1.5 and 2.1 percent
respectively, despite a deterioration in French consumer and
businesses morale in November. 
    Sales continued to improve in Portugal, up 3.1 percent on
the month, the strongest in entire euro zone, and in Spain,
where retail sales rose 1.9 percent.
    "Strengthening consumer confidence and the help to
purchasing power coming from muted inflation across the euro
zone will increasingly underpin consumer spending and help
economic activity to gradually gain momentum as 2014 proceeds,"
said Howard Archer, economist at IHS Global Insight.
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