Eurozone inflation stabilized in July, according to a preliminary estimate from the region's statistics office, but a modest increase in core consumer prices, which is closely watched by the European Central Bank, went up to a four-year high against market expectations of a drop that could signal a slow turnaround in the region's inflation outlook.

Annual Eurozone inflation held steady at a rate of 1.3 percent in July, which is comfortably below the European Central Bank’s target rate, in a sense that will probably ease the pressure on ECB policymakers as they head off for their summer breaks.

Core Inflation

Core inflation, which excludes the two most volatile components of unprocessed food, energy, alcohol, and tobacco products, went up to 1.3 percent from 1.2 percent last month, contrary to market expectations of a drop to 1.1 percent that suggests underlying wage pressures and economic activity are heading higher. It was its lowest level since August 2013.

Inflation grew mostly for energy products from 1.9 percent in June to an estimated 2.2 percent in July, as oil prices increased.

Consumer prices went up as well for other industrial goods by 0.5 percent from a 0.4 percent inflation rate in June. Inflation was stable at 1.4 percent for food, alcohol, and tobacco products, while it decreased in services to 1.5 percent from 1.6 percent.

Unemployment Rate Falls

According to the European Union's statistics, office unemployment in the 19-country currency union has dropped to its lowest level since 2009, confirming the strong recovery of the euro zone's economy and giving the ECB more ground for tightening its monetary policy in the autumn.

Eurostat said unemployment in the euro zone fell to 9.1 percent in June from 9.2 percent in May, reaching its lowest level since February 2009 and beating market expectations of a 9.2 percent rate. Eurostat also revised down the May unemployment figure to 9.2 percent from the previously estimated 9.3 percent.

The unemployment rate went down in Italy and Spain, the two Eurozone countries with the highest rates, not including Greece for which fresh data were not available.

In Italy, unemployment dropped to 11.1 percent in June from 11.3 percent in May, meaning that almost 60,000 were added to the Italian workforce. In Spain, the rate fell to 17.1 percent from 17.3 percent. In Germany, the largest economy of the union, unemployment plummeted to 3.8 percent in June from 3.9 percent the previous month, increasing expectations of bigger wage rises that could fortify growth in the Eurozone a whole.

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