(RTTNews) - Eurozone annual inflation stayed negative for a fifth consecutive month in October, but the pace of decline in consumer prices slowed, preliminary data released by the Eurostat showed Friday. Separately, the statistical agency said the jobless rate rose to its highest level in more than a decade.

The consumer price index dropped 0.1% year-on-year in October after falling 0.3% in September, in line with economists’ expectations and extending the fall that started in June. The statistical agency is slated to release final report on November 16.

Current rate of inflation suggests that it is likely to turn positive in the coming months. “Looking ahead, inflation will almost certainly move out of negative territory next month and rise further going into 2010,” ING economist Martin van Vliet said. The economist said inflation is bound to stay comfortably below the European Central Bank’s medium-term target of below but close to 2%, as core inflation will ease further.

Core annual inflation in the 16-nation bloc had slowed to 1.2% in September from 1.3% in August. The core consumer price index excludes prices of food, alcohol, tobacco and energy.

“Going forwards, de-favourable base effects should push inflation higher and in positive territory during the last quarter of the year,” BNP Paribas economist Clemente De Lucia said in a note. “By contrast, core inflation should remain subject to downward pressures.”

On Thursday, ECB governing council member Guy Quaden said inflation in the euro area will be “very weak” in the coming months, which would make ECB’s monetary policy decisions “very obvious”. The ECB is likely to hold its key interest rate at a record low of 1% in its next Governing Council meeting on November 5. “The ECB will be in no hurry to start raising interest rates,” Commerzbank analyst Rainer Guntermann said.

In a separate report, the Eurostat said the seasonally adjusted jobless rate rose to 9.7% in September from 9.6% in August. This was the highest rate since January 1999. The jobless rate came in line with economists’ expectations. A year ago, the jobless rate was 7.7%. There were 15.32 million people out of job in September.

“The government-sponsored short-time working schemes adopted in many Eurozone countries continue to have a dampening effect,” ING economist said. The economist warned that there is more unemployment in the pipeline.

Survey data released by the European Commission on Thursday showed that Eurozone economic sentiment in October was the strongest since September 2008, pointing towards a possible recovery in the third quarter. Last week, a survey by Markit Economics showed that Eurozone private sector output rose at its fastest pace since December 2007 with the manufacturing sector expanding for the first time in seventeen months and services sector maintaining growth.

In EU27, the jobless rate was 9.2% in September, highest since the start of the series in January 2000. It was up from 9.1% in August.

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