More economic data is supporting the case for higher European interest rates. Unexpectedly, German unemployment has dropped again. It was the first time since German reunification in 1990 that the seasonally unadjusted jobless figure had fallen in July. Normally it goes up then as young people register as jobless at the start of the summer holidays.
At the same time the EU said that in June unemployment for the entire euro zone fell to its
lowest in nearly five years. European manufacturing also continued to expand in July. A monthly survey of euro zone company purchasing managers produced an index that was not quite as strong as June’s high but manufacturing is still growing at close to the fastest pace in six years. France, where unemployment fell in June for a fifth month to the lowest in four years, showed the best improvement. The high cost of oil continues to push up inflation the price of crude has risen by 21% in the past year.
With inflation at 2.5% in July, still above the European Central Bank’s preferred level of 2%, the betting is for another interest rate rise from bank president Jean-Claude Trichet and his fellow policy makers at their meeting this week. The ECB has put up the rate three times since last December.