Euro zone unemployment was flat at 10 per cent for the fourth month running in June and inflation remained muted in July, boosting the case for the fragile economic recovery to be nursed with low interest rates.
European Union statistics office Eurostat said inflation in the 16-nation currency area edged up to 1.7 per cent year-on-year in July from 1.4 per cent in June, in line with economists' expectations and comfortably below the European Central Bank's target of just under 2 per cent.
The inflation figure strengthens expectations that the ECB will keep its main interest rate unchanged at an historic low of 1.0 percent into 2011, especially as the recovery is modest and could still falter.
"There remains a compelling case for the ECB to keep interest rates down at 1.0 percent not only through 2010 but deep into 2011, given that euro zone growth remains at risk from tightening fiscal policy in a number of countries and a loss of momentum in global growth," said Howard Archer, chief Europe economist at IHS Global Insight.
The flat unemployment rate is the latest in a string of indicators that have shown the euro zone continues to recover from the worst economic crisis in decades, despite turbulence on sovereign debt market and uncertainty about the health of banks.
But with the rate still near a 12-year high, growth may falter later in the year, partly due to fiscal austerity ordered by many governments to prevent Greece's debt crisis from spreading to other countries.
Eurostat said 15.771 million people were jobless in the euro zone in June, 6,000 more that in May.
In Germany, the euro zone's biggest economy, unemployment was unchanged at 7.0 per cent, after falling in May. But German subsidies that have kept many workers employed will start expiring later this year, possibly boosting the jobless count.
Unemployment fell in Italy to 8.5 per cent from 8.6 per cent and increased in France to 10 per cent from 9.9 percent.
Spain, where the construction sector has collapsed after years of overheating, saw unemployment rise to 20 per cent from 19.8 per cent.
The lowest rates were recorded in Austria and the Netherlands - 3.9 per cent and 4.4 per cent respectively.
Even as economic sentiment indicators showed economic growth continued in the third quarter, the inflation figure confirmed the absence of price pressure. The euro zone is expected to grow 0.9 per cent in 2010, according to the European Commission.
No detailed breakdown or monthly data was available with Eurostat's so-called flash estimate, but the June figure is likely to have been dampened by slower-than-expected price growth in the euro zone's biggest economy, Germany.
German consumer prices rose 1.1 per cent on an annual basis in July, preliminary data from the Federal Statistics Office showed on Monday, easing from a 0.9 per cent rise in June.
Reuters