By Brian Blackstone 

FRANKFURT--Europe's economic prospects worsened as inflation across the euro area weakened again and unemployment in Italy reached its highest rate in nearly four decades--putting added pressure on the European Central Bank to step up its stimulus campaign.

The newest data came as a drop in oil prices threatens to soften inflation further below the ECB's objective, to as low as zero by the start of next year.

Other reports Friday confirmed a grim outlook for much of the eurozone's $13.2 trillion economy, the world's second largest after the U.S. Unemployment across the region rose by 60,000 last month, keeping the unemployment rate at 11.5%, the European Union's statistics agency Eurostat said, far higher than in the U.S. Consumer spending fell in France and Spain.

Eurostat also said consumer prices were just 0.3% higher in the eurozone in November on an annual basis versus 0.4% in October, matching a five-year low. The inflation rate has now been below 1% for 14 straight months, while the ECB targets a rate of just under 2%.

"It's a story of economic malaise that has multiple sources," said Nick Kounis, economist at ABN AMRO.

And consumer prices are expected to soften further after the sharp drop in oil prices to four-year lows following the decision by the Organization of the Petroleum Exporting Countries to maintain its output target. Analysts at BNP Paribas estimate that each $10 drop per barrel in oil prices reduces eurozone inflation by 0.4 percentage point.

Responding to low inflation damped by oil prices is complicated for the ECB. Although the lower costs depress inflation further below the bank's target, they also help the economy by freeing up disposable income for households and businesses to spend and invest.

The danger for the ECB is that European households and businesses may not see falling energy prices as a temporary windfall but rather the continuation of an ultra-weak price trend that will persist far into the future. This could prompt companies to put off investment and hiring, for instance. Financial market-based measures of inflation expectations have fallen in recent months, suggesting investors are losing faith in the ECB's ability to meet its target.

Falling oil prices don't feed through to the gasoline pump to the same extent in Europe as in the U.S., because taxes make up more of the fuel prices that Europeans pay. However, Europe imports more of its energy needs than the U.S. does, so that overall a falling oil price creates mostly winners in Europe and can lift the economy.

"Both economies benefit, but the U.S. by more," said Luigi Speranza, economist at BNP Paribas.

Yet the benefits aren't uniform across the 18-country currency bloc. In Germany, where unemployment is near record lows and confidence is high, falling oil prices in recent months have coincided with stronger consumer spending. German retail sales were up 1.9% in October from September, the sharpest gain in over three years.

But in France, whose 10.5% unemployment rate is more than twice Germany's according to common European standards, consumer spending unexpectedly fell last month. Retail sales were also weak in Spain where the unemployment rate was 24% in October versus the eurozone's average of 11.5%.

Italy's 13.2% jobless rate was its highest since 1977. Retail sales there fell in September for a fifth-straight month.

The benefits for Europe's economy of cheaper oil are also diluted by the euro's recent weakness against the dollar, which means Europeans have to pay a little more for dollar-denominated energy imports. The falling oil price this year has partly been a reflection of the fact that demand for energy in Europe--one of the world's biggest energy consumers--has been weak, along with overall economic demand in Europe.

The eurozone "needs every bit of help it can get," said Howard Archer, chief European economist at consultancy IHS Global Insight in London. "But it will need a lot more than an oil-price fall to help economic activity pick up in the eurozone," he said.

Most analysts expect ultralow inflation to prompt the ECB to purchase large amounts of government bonds in early 2015 to raise the money supply and further depress borrowing costs, following a route taken by central banks in the U.S., U.K. and Japan. Commerzbank economists said Friday they expect eurozone inflation to hit zero by January.

"We will do what we must to raise inflation and inflation expectations as fast as possible," ECB President Mario Draghi said on Nov. 21. In a subsequent speech five days later, his deputy, Vitor Constancio, put the ECB closer to buying public debt by saying specifically that the ECB would consider this option if it decides its current measures--including bank loans and purchases of covered bank bonds and asset backed securities--are insufficient.

But Mr. Constancio's emphasis on the first quarter of 2015 appeared to play down the chances of an explicit announcement as soon as the ECB's Dec. 4 policy meeting.

"It's just a question of time," before the ECB buys government bonds, known as quantitative easing, said Mr. Speranza. Analysts at Citi expect the ECB to launch a government bond program at its Jan. 22 meeting.

Marcus Walker and Paul Hannon contributed to this article.

Write to Brian Blackstone at brian.blackstone@wsj.com