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Euro Inflation Stable at 1.9% in January As Jobless Rate Hits Record Low

The euro economy is keeping prices stable and cutting its jobless rate to a record low, according to statistics out Wednesday, but business confidence was more subdued as industry was unsure growth would continue at its recent fast pace.

Euro inflation stayed at 1.9%, the same as the previous two months, while unemployment in the 13-nation euro area hit a new record low, falling to 7.5% in December from 7.6% a month earlier, the EU statistics agency Eurostat said.

Year-on-year inflation is watched closely as the European Central Bank decides whether to press on with a series of interest rate rises that would increase the cost of borrowing. Inflation is now at its recommended level of just under 2%.

Eurostat's figure is a first estimate and it will provide more details on each nation on Feb. 28.

But the latest figures come a day after Germany, Europe's largest economy, reported only a modest increase in inflation, from 1.6% in December to 1.4% this month, easing concerns a New Year sales tax increase would make Germans curb recent shopping trends. Domestic demand is now one of the main drivers of euro area growth.

Europe has been slow in driving down its high unemployment as the economy picks up but Eurostat figures show that may finally be happening in the euro area.

However, unemployment in the entire 27-nation EU remained stable at 7.6%.

Looking ahead, business sentiment is less optimistic than in recent months. The European Commission's economic sentiment indicator went down in both the euro area and the EU in January.

Euro confidence went down to 109.2 from an October high, while the EU figure fell to 110.7% from its November peak. The economic bellwether is still above its historic average though, the Commission said.

The EU executive said confidence in the euro area "decreased somewhat in all sectors" apart from services where it stayed stable. In the EU, business sectors were "in general rather subdued" although consumers and the retail trade were unchanged.

Consumer confidence in the euro area worsened slightly as spenders were more pessimistic about the general economic situation, seeing no major change to their finances or savings in the next year.

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