TV dinners and staycations cut euro zone inflation

Fri Dec 14, 2012 7:16am EST
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By Robin Emmott

BRUSSELS (Reuters) - Europeans' reluctance to spend on travel and eating out slowed increases in the cost of living in the euro zone in November, abetted 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 December numbers.

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.   Continued...

Pedestrians read recruitment announcements in central London October 15, 2008. REUTERS/Alessia Pierdomenico