By Simone Meier Nov. 30 (Bloomberg) -- European consumer prices increased for the first time in seven months in November led by energy costs as the economy recovered from the worst slump since World War II. Prices in the 16-nation euro region rose 0.6 percent from a year earlier after falling 0.1 percent in October, the European Union statistics office in Luxembourg said today. Economists had projected a gain of 0.4 percent, the median of 30 forecasts in a Bloomberg News survey showed. Oil prices have risen 9 percent in the past three months as the economy has gathered strength. While the euro-area economy returned to growth in the third quarter, companies continue to cut costs and eliminate jobs to bolster earnings. The European Central Bank has signaled it sees “moderate” inflation and is in no rush to withdraw stimulus measures. “The medium-term outlook for euro-zone inflation remains very subdued,” said Martin van Vliet, a senior economist at ING Bank in Amsterdam. ING anticipates the ECB will “adopt a very gradual approach to withdrawing its emergency liquidity measures, and to keep interest rates on hold for an extended period,” he said. The euro was higher against the dollar after the inflation report, trading at $1.5050 at 10:52 a.m. in London, up 0.4 percent on the day. The yield on the German 10-year benchmark bond dropped 0.1 basis point to 3.15 percent. Latest Forecasts The ECB said on Nov. 12 that professional forecasters project European inflation will average 0.3 percent this year and 1.2 percent in 2010. The Frankfurt-based central bank, which aims to keep annual gains in consumer prices just below 2 percent, will release its latest forecasts for economic developments and inflation on Dec. 3. For now, a recovery may remain too fragile for companies to start adding workers. European unemployment probably rose to 9.8 percent in October from 9.7 percent in the previous month, according to the median estimate in a Bloomberg survey of economists. The statistics office will release the unemployment report tomorrow at 11 a.m. Remy Cointreau SA, France’s second-largest liquor company, on Nov. 25 forecast “modest” third-quarter sales after profit dropped 18 percent in the year’s first six months. Hugo Boss AG, Germany’s largest clothing maker, said earlier this month that it projects sales will remain “challenging” in the first half of 2010. Coming Months European households anticipate prices will decline further in coming months. A gauge of consumers’ price expectations over the next 12 months rose to minus 11 in November from minus 14 in the previous month, the European Commission said on Nov. 27. “Economic activity is unlikely to be strong enough to generate significant inflationary pressures for some considerable time to come,” said Howard Archer, chief European economist at IHS Global Insight in London. “There remains a compelling case for the ECB to only very gradually withdraw its emergency liquidity measures.” The ECB has cut borrowing costs to a record low, purchased covered bonds and injected billions of euros into markets to encourage lending. Policy makers meeting in Frankfurt on Dec. 3 may keep the key rate at 1 percent, a Bloomberg survey shows. “We still don’t know to what extent the incipient global recovery has enough support on its own to allow for exceptional stimulus to be withdrawn without the danger of a relapse in activity,” ECB council member Miguel Angel Fernandez Ordonez said on Nov. 23. Inflation “although positive, will remain at moderate levels in the near future.” The statistics office will release a breakdown of November inflation data on Dec. 16. To contact the reporter on this story: Simone Meier in Dublin at smeier@bloombert.net

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