Labour market: Unemployment rateThe labour market is generally resilient, despite sectoral weaknesses. The employment situation remains solid, with an unemployment rate of 3.7% in May, despite a slight increase of 0.2 percentage points since the beginning of the year.
The IAB and IFO employment surveys remain below their reference values. While employment in the service sector remains resilient, this is less so in the manufacturing sector (which has been recording net job losses since the third quarter of 2023, with the latest figures dating from the first quarter of 2025), against a backdrop of under-utilisation of production capacity.
InflationInflation is in line with targets, but is not expected to fall further. Annual inflation (harmonised index) returned to 2% in June (from 2.1% year-on-year in May), in line with the eurozone average.
Energy prices continue to fall, while price rises for services are slowing; underlying inflation fell to 2.5% (from 2.7% in May). We expect inflation to remain around 2% until the end of 2026. The labour market is likely to remain tight, particularly due to the government's investment plan, which will keep inflationary pressures persistent.
