Euro zone inflation and unemployment fell in January and economic sentiment is on the rise again thanks to more optimistic consumers, data showed today.
The European Union's statistics office Eurostat revised down its initial inflation estimate for January to 1.8 per cent year-on-year from the previously announced 1.9 per cent after prices fell 0.5 per cent month-on-month.
Markets had expected the annual inflation figure in line with Eurostat's first estimate, although some economists said yesterday the figure could be revised down after benign inflation data from some German states.
Last year many economists and the European Central Bank expected inflation to rise at the start of 2007 due to a three percentage point rise in the value added tax in Germany.
The ECB has already signalled it would raise interest rates by 25 basis points to 3.75 per cent on March 8, and many economists expect it will increase the cost of borrowing further to 4.0 per cent later this year as the euro zone economy fires on all cylinders and money supply soars.
A European Commission survey showed that consumers' expectations of inflation over the next 12 months among consumers fell strongly to 20 points in February from 23 points in January and were below the long-term average of 23 points.
Likewise, selling price expectations among businesses declined to 12 points in February from 14 in January.
The ECB aims to keep inflation below but close to 2 per cent and monitors inflation expectations closely.