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Last Updated: Friday, 30 November 2007, 17:12 GMT
Eurozone inflation at 6-year high
Euro notes
Eurozone nations are expected to see slower growth in 2008
Inflation in the 13-nation eurozone hit 3% in November year-on-year, marking its highest level in more than six years, official data shows.

The rise, which was more than expected, stemmed from higher food and oil prices and follows October's figure of 2.6%.

The European Central Bank (ECB) faces a dual problem of high inflation and low growth due to slow consumer spending.

Analysts say the bank is unlikely to alter interest rates, currently at 4%, when it meets next week.

"It all looks like a recipe for the ECB to sit on its hands for a sustained period," said Dominic Bryant at BNP Paribas.

Slowing growth

Looking ahead, analysts say oil prices are likely to keep rising, further pushing up inflation.

"Inflation will no doubt remain well about 2% over the next few months," said Christoph Weil, an economist with Commerzbank.

"The base effect resulting from oil prices will only disappear next spring."

Forecasts both in Europe and the US suggest growth will slow in last three months of 2007 and throughout 2008 as the full impact of the housing slowdown and credit squeeze feeds through.

Figures are beginning to show that consumers are tightening spending.

Earlier on Friday, retail sales in Germany - the largest economy in the eurozone - saw a significant fall for October.

Sales dropped 4.4% on an annual basis last month, and by 2.7% compared with September, numbers from the Bundesbank showed.

Meanwhile, separate figures from Eurostat confirmed that eurozone growth in the third quarter rebounded - at 0.7% quarter-on-quarter compared to 0.3% in the previous three month period.

This reinforces the view that consumer spending was robust in the three months to the end of September - when the credit crunch hit - but that in months to come it will contract when the impact kicks in.

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