Inflation in Europe rose by 5.3 pc in August compared to previous year
Aug 31, 2023
London [UK], August 31 : Consumer prices in the 20 countries that use the euro rose 5.3 per cent on average this month compared with a year ago, showed preliminary estimates by Europe’s statistics office, CNN reported.
That was unchanged from the annual rate of inflation in July.
In July, core inflation which excludes volatile food and energy prices, eased to 5.3 per cent, from 5.5 per cent.
The biggest drivers of inflation in August were food, alcohol, tobacco and services, although those prices rose at a slower annual pace than the previous month.
Compared with July, energy prices increased by 3.2 per cent, tempering the annual rate of decline to 3.3 per cent in August from 6.1 per cent the previous month.
Senior economist at Deutsche Bank, Marc de Muizon, said in a research note: “The increase in energy prices amid rising oil prices in the last few weeks was an important driver of the apparent stagnation of the headline print this month.”
Persistent inflation could increase pressure on the central bank to raise interest rates again, to a new record-high, when it meets next month, despite growing evidence that the European economy is at risk of sliding into a recession, as per CNN.
The ECB in July raised rates for the ninth consecutive time, taking the benchmark borrowing cost in the euro area to 3.75 per cent.
Survey data has since then highlighted the risk that Germany’s economy — the biggest in Europe — may already be falling back into recession. It suffered the steepest decline in business activity for more than three years this month, according to Purchasing Managers’ Index data published last week.
Deutsche Bank’s de Muizon said the ECB may be encouraged by signs that the prices of services were a little weaker than expected.
“The main uncertainty moving forward will be how fast and far services inflation rates drop as the weakening [economic] growth momentum will be counteracted by persistently elevated wage inflation,” he wrote, as per CNN.
