Rising Energy Costs Threaten to Further
Weaken Region's Economy
by Air Max Pas Cher
Zurich/Brussels---European inflation
accelerated in February while manufacturing output contracted as
political tensions in the Middle East boosted oil prices even as the
economy heads into a recession.
The inflation rate in the 17-nation
eurozone rose to 2.7 percent from 2.6 percent in January, the
European Union's statistics office in Luxembourg said in an initial
estimate on Thursday. Unemployment rose to 10.7 percent in January, a
14-year high, it said in a separate report.
Manufacturing output contracted for a
seventh month in February as the eurozone economy struggles to
rebound from a contraction in the fourth quarter. A manufacturing
gauge based on a survey of purchasing managers in the 17-nation
eurozone rose to 49, a six-month high, from 48.8 in January, the
London-based Markit Economics said on Thursday. That's in line with a
preliminary estimate on Feb 22. A reading below 50 indicates
contraction.
Manufacturers may see waning sales
growth as EU governments toughen spending cuts just as global demand
weakens. Europe's economy may struggle to gather strength after
shrinking in the fourth quarter as governments from Italy to Greece
step up budget cuts, undermining hiring and consumer demand. While
crude-oil prices have increased about 23 percent over the past year,
companies may find it difficult to raise prices in coming months,
economists said.
"Oil-price developments will be a
key factor in future eurozone consumer-price developments,"
Howard Archer, chief European economist at IHS Global Insight in
London, said before Thursday's reports."But the likelihood
remains that weakened economic activity and high and rising
unemployment should generally limit underlying price pressures,"
he said.
The eurozone economy may shrink 0.3
percent this year after expanding 1.4 percent in 2011, the European
Commission said on Feb 23. While Germany's economy, Europe's largest,
is seen growing 0.6 percent in 2012, the commission projected
contractions for Belgium, Greece, Spain, Italy, Cyprus and the
Netherlands. Rising energy costs threaten to further weaken the
region's economy by sapping the purchasing power of companies and
consumers.
Oil prices have increased in recent
months on the concern that sanctions against Iran will disrupt
supplies from the second-largest producer in the Organization for
Petroleum Exporting Countries.
Ewald Nowotny, a council member at the
European Central Bank, said at a conference on Tuesday that
"disturbing developments in the Middle East" could fuel
eurozone inflation. "That could make life a bit more difficult,"
he said.
The ECB cut borrowing costs twice in
the fourth quarter, bringing the benchmark rate to 1 percent,
matching a record low, to bolster the economy. The Frankfurt-based
central bank will publish its latest inflation projections when
council members meet on March 8. In December, it forecast that
inflation will slow to 2 percent this year from 2.7 percent in 2011.
The statistics office is scheduled to
release a breakdown of February consumer prices later this month.
Core inflation, which excludes volatile costs such as energy, in the
eurozone slowed to 1.5 percent in January from 1.6 percent in
December.
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About the Author: Air Max see
http://www.articlesxpert.com/authors/jordan%20Mc/,
or http://goarticles.com/article/EU-inflation-rising-
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