With unemployment steadying and retail sales surging, eurozone recovery hopes mount

LONDON – Glimmers of hope emerged Wednesday for the eurozone economy to suggest that the coming year will see the recovery gathering steam.

Official figures showed a stabilization in unemployment and the biggest increase in monthly retail sales in 12 years.

Eurostat, the EU’s statistics office, said the eurozone’s unemployment rate held steady in November at a record 12.1 per cent for the eighth month running after a modest 4,000 rise in the ranks of the jobless to 19.24 million. Since September’s 12.2 per cent rate was revised down, 12.1 per cent is now the record.

The agency also said retail sales during the month spiked by 1.4 per cent, way ahead of predictions in the markets for a more modest increase of around 0.3 per cent. The rise was the biggest since November 2001.

Though much of the increase was due to a 2.1 per cent rise in France, where consumers may have brought forward purchases ahead of a sales tax rise, analysts said the figures suggest households are increasingly confident that the financial crisis is past its worst and that the recovery has legs.

The increase followed two monthly declines and was fairly broad-based across the eurozone. The Iberian economies of Spain and Portugal did particularly well, posting gains of 1.9 per cent and 3.1 per cent.

“The outlook is starting to brighten a little for eurozone consumers,” said James Howat, European economist at Capital Economics.

Despite the signs of improvement, the eurozone continues to face huge problems and most economists think it will remain the laggard of the world economy. However, few think the European Central Bank will change its monetary policy at its monthly meeting on Thursday.

“The ECB may want to keep some ammunition in its back pocket in case of emergencies,” said Kathleen Brooks, research director at

Among the challenges will be to get unemployment down and prevent deflation, a sustained fall in prices that can encourage consumers to put off purchases in the hope of getting better bargains further down the line.

Wednesday’s figures highlighted disparities across the eurozone, which had 17 members in November — the bloc grew to 18 members following Latvia’s adoption of Europe’s single currency at the start of the year.

While countries like Germany and Austria have unemployment rates around 5 per cent, those at the forefront of Europe’s debt crisis, such as Greece and Spain, have over one in four of their people out of work.

The situation among the young there is even worse, though Greece appears to be showing some improvement on that front, with 54.8 per cent of those aged 15-24 out of work at last count in September, compared with 57.7 per cent the previous month.

Policymakers are hoping the eurozone’s return to economic growth may get unemployment down. So far, the eurozone’s recovery from its longest-ever — though not deepest — recession has been paltry but most economists are predicting a modest pick up this year, with even Greece emerging from a six-year depression that has seen its overall economic output shrink by over a fifth.

Because it takes a few months for changes in economic growth to affect the labour market, and as many governments continue to make spending cuts to get public finances into shape, most economists think it will be some time before there’s a real drop in unemployment.

“It is good news that labour shedding has receded so that the number of unemployed is no longer rising, or at least not by much,” said Marie Diron, a senior economist adviser at EY, formerly Ernst & Young. “But we think that it will be a long while before we see a fall in unemployment.”

Figures for the wider 28-country EU, which includes non-euro countries such as Britain and Poland, also painted a rosier economic outlook. Unemployment across the bloc was 10.9 per cent in November, leaving it stable since May, while retail sales spiked 1.2 per cent.