FRANKFURT, Germany—Europe’s economic recovery is gathering speed, with growth up, inflation spiking sharply higher and unemployment down at its lowest in nearly eight years, official figures showed Tuesday.
In perhaps the most striking development, European Union statistics agency Eurostat said inflation across the 19 countries that share the euro currency rose sharply in January—a move that will likely encourage critics who think it’s time for the European Central Bank to start withdrawing its stimulus programs.
Inflation jumped to an annual 1.8 percent in January, from 1.1 percent the month before. That’s the highest level since February 2013 and means inflation is arguably at the ECB’s goal of “just below 2 percent.”
Eurostat also revealed that eurozone growth inched up by a quarterly rate of 0.5 percent in the fourth quarter of 2016 from the previous three-month period. That was just higher from the third quarter rate of 0.4 percent and means that the eurozone economy expanded by 1.7 percent in 2016 as a whole.
In another sign that the eurozone recovery is gaining momentum, Eurostat said unemployment across the region fell to 9.6 percent in December. That’s the lowest unemployment rate since May 2009, before a financial implosion in Greece kicked off a eurozone-wide debt crisis whose effects are still being felt.
The figures will likely be a welcome boost to supporters of the European Union and the euro currency—especially in a year when they face election challenges from right-wing, anti-EU parties. Elections in France, the Netherlands, Germany and possibly Italy will give populist forces a chance to test their support with voters.
The inflation figure could present a headache however for Mario Draghi, head of the European Central Bank. It’s likely to embolden critics, particularly in Germany, who say it’s time for the bank to start withdrawing its extraordinary stimulus aimed at increasing inflation toward the bank’s goal.
The ECB has held its benchmark interest rate at zero and is purchasing government and corporate bonds with newly printed money, a step that pumps fresh cash into the financial system. Critics say that the policy punishes savers, who get no return on conservative holdings such as bank deposits, and supports indebted governments with cheap borrowing costs.
Draghi however has shown no signs of readiness to start scaling back. He says the spike in inflation is caused by volatile oil prices, not by underlying price pressures in the economy. Core inflation, which excludes oil and food prices, remained stuck at 0.9 percent.