(RTTNews) - Suggesting an easing in price pressures in the Eurozone, consumer price annual inflation slowed in August from a record high. At the same time, the economic sentiment deteriorated more than expected during the month.

A flash estimate published by the Eurostat on Friday stated that the Eurozone annual inflation eased to 3.8% for August from 4% in July, while economists were expecting it to remain stable at 4%.

Benefiting from lower oil prices, energy prices would have moderated in August contributing to decrease in inflation. Inflation eased from July’s 4%, which was the highest since June 1992. However, annual inflation continued to stay above the European Central Bank, or ECB target, which is to keep inflation rates “below, but close to 2% over the medium term”.

The statistical office is set issue final consumer price inflation numbers on September 16.

In a separate communiqu�, the Eurostat said that the jobless rate in the eurozone remained at 7.3% in July for the fourth straight month. The unemployment rate also matched economists’ expectations.

Among the member states, Denmark registered the lowest unemployment rate of 2.3% followed by the Netherlands registering 2.6%. Meanwhile, Spain recorded the highest rate of 11% and Slovakia 10.3%.

Compared with the previous year, twenty member states recorded a fall in their unemployment rate, six registered an increase, and one state recorded no change.

The monthly survey released by the European Commission showed that the Eurozone economic sentiment weakened more than expected in August.

Declining for the third straight month, the economic sentiment stood at 88.8 in August, compared with 89.5 in July. Economists had expected the index to drop to just 89.3 in August. The overall deterioration was caused by lower confidence in industry and retail trade.

Consumer confidence improved for the first time in 2008. The consumer confidence index rose slightly to minus 19 from July’s minus 20 and services confidence climbed to 3 from 1. Economists had expected the consumer confidence to stay unchanged at minus 20 and services confidence at 1.

On the other hand, industrial confidence weakened to minus 10 and the confidence in retail sector fell to minus 11.

Indicating that industrial activity remained subdued in EU15, the business confidence dropped to minus 0.33 in August from a revised reading of minus 0.2 in July.

Among the five underlying components of business confidence, four of them declined. Industrial managers’ production expectations declined the most, while their assessment of production trend observed in recent months was the only indicator to record improvement.

The economic sentiment in EU27 reached the lowest level since December 1993. The index stood at 86.9 in August, down from July’s 88.8.

In the second quarter, the Eurozone economy had contracted for the first time since the launch of Euro nearly a decade ago. The gross domestic product contracted 0.2% in the second quarter from the first three months of the year. The 15-nation economy shrunk after growing 0.7% in the first quarter.

Commenting on Eurozone inflation, economists at BNP Paribas said that although the signs of the weakness of the economy are mounting, the ECB would possibly resist pressures to cut interest rates as long as inflationary tensions remain strong. The central bank is expected to retain the refi rate at 4.25% for a prolonged period.

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