logo
  

Eurozone Inflation Reaches New Record High

eurozoneflag feb01 01jul22 lt

Eurozone inflation accelerated further to a new record high in June, while core inflation unexpectedly moderated due to the fiscal support measures to contain energy prices, official data showed Friday.

The harmonized index of consumer prices advanced more-than-expected by 8.6 percent on a yearly basis in June, faster than the 8.1 percent rise in May, flash data from Eurostat showed on Friday. The annual rate was expected to rise to 8.4 percent.

Meanwhile, core inflation that excludes energy, food, alcohol and tobacco, unexpectedly eased to 3.7 percent from 3.8 percent. The rate was forecast to rise to 3.9 percent.

On a monthly basis, the HICP was up 0.8 percent. The final data is due on July 19.

The record high inflation was driven by the 41.9 percent increase in energy prices. This was followed by an 8.9 percent rise in food, alcohol and tobacco prices and 4.3 percent growth in non-energy industrial goods prices. Services cost advanced 3.4 percent.

The headline inflation will remain very high until the end of the year as the further jump in gas prices feeds through to retail energy prices and food prices continue to climb, Capital Economics economist Andrew Kenningham, said. Admittedly, headline inflation should fall next year.

As policymakers are increasingly uncomfortable with their negative-interest rate policy bigger rate hikes are likely from September, with the deposit rate rising to +0.75 percent by year-end, the economist added.

ING economist Bert Colijn observed that the drop in core inflation is impacted by fiscal support and therefore not a reliable measure of underlying inflation in the eurozone. Hawks will push further for a 50 basis point hike in July on the back of this given the uncertain inflation outlook at this point.

Among big-four economies, inflation slowed only in Germany. Germany's inflation slowed in June from a record high due to the government's energy relief package. EU harmonized inflation slowed to 8.2 percent from 8.7 percent in May.

Meanwhile, France's inflation rose to 6.5 percent in June from 5.8 percent in May and Spain's inflation advanced to 10.0 percent from 8.5 percent. Similarly, Italy's inflation came in at 8.5 percent in June, up from 7.3 percent in the prior month.

For comments and feedback contact: editorial@rttnews.com

Business News

Editors Pick
Factory orders and construction Purchasing Managers' survey data from Germany and retail sales from the euro area are due on Thursday. At 2.00 am ET, Destatis is scheduled to issue Germany's factory orders data for August. Orders are forecast to fall 0.7 percent on month, slower than the 1.1 percent decrease in July. Stocks staged a significant recovery attempt after pulling back sharply in early trading on Wednesday but still ended the day modestly lower. The major averages gave back ground after moving sharply higher over the two previous sessions. Three scientists have shared the Nobel Prize for Chemistry for their work that led to the development of linking molecules together, known as click chemistry, and bioorthogonal chemistry. Morten Meldal and K. Barry Sharpless have laid the foundation for a functional form of chemistry - click chemistry - in which molecular building blocks snap together quickly and efficiently. Carolyn R. Bertozzi
Follow RTT