Consumer price growth in the Eurozone hit its highest level in more than a decade in September after major economies in the currency area reported significant increases in inflation.
The European Union statistics office Eurostat said Friday that preliminary annual headline inflation in the euro-area rose to 3.4% in September, the most in 13 years. Last month’s growth rate beat both the market forecast of 3.3% and the 3.0% reported in August.
Preliminary core inflation last month also jumped to its highest level since 2008 with a reading of 1.9%, which surpassed the 1.8% estimate and the August’s 1.6%.
The European Central Bank inflation target is 2% over the medium term, but the bank and a wide range of its officials have repeatedly stated that current price increases are likely transitory.
Eurostat said the annual growth rate for energy prices in September soared to 17.4% versus 15.4% in August. On Friday, European natural gas prices set another record, the second this week.
Andreas Wallström, head of forecasting at Swedbank, tweeted: “The high inflation is largely due to extreme base effects (with prices falling a year ago), which will fade over the coming months and in particular as from next year.”
But the breadth of the current price push is concerning, noted Carsten Brzeski, ING’s head of macroeconomics. “The surge in headline inflation is still mainly driven by so-called one-off factors such as higher energy prices, the German VAT reversal or price mark-ups post-lockdown in the leisure and hospitality services. However, higher inflation has been spreading across the entire economy, with almost half of the major 100 components in the consumer price basket recording inflation rates of above 2%.”
Temporary or here to stay?
Brzeski noted that some one-off factors are likely to fizzle next year but warned that inflation could turn out to be stickier than the “transitory” camp currently assumes. “We see two kinds of second-round effects materialising, keeping inflation higher than expected next year. The first is the pass-through from higher producer prices to consumer prices. In the past, producers absorbed higher costs by squeezing profit margins. This time around, they seem to be willing to pass on higher costs to consumers as illustrated by the fact that selling price expectations in both the manufacturing and services sector are currently at or are close to record highs.
“The second pass-through channel will be wages. The mismatch in the labour market between the lack of skilled workers and still high unemployment rates as well as a re-regionalisation of production as a result of supply chain frictions could give rise to higher wages.”
That Eurozone inflation would rise in September seemed like a given following the release of consumer price data from the currency bloc’s major economies on Wednesday and Thursday. Germany reported annual EU-harmonised inflation of 4.1%, its highest since the country began issuing numbers adjusted for comparison among member states in 1997. Consumer prices in Spain jumped 4% last month, their highest increase in 13 years. September inflation in Italy hit 3.0%, with France close behind at 2.7%
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var months = ['Jan','Feb','Mar','Apr','May','Jun','Jul','Aug','Sep','Oct','Nov','Dec'];
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- Headline, core rates exceed forecasts
- Increases follow surging national inflation
- Energy prices fuel headline surge
By Eric Culp, European Editor
LiveSquawk News
@EricCulpLS
1 October 2021 | 10:00 GMT
Consumer price growth in the Eurozone hit its highest level in more than a decade in September after major economies in the currency area reported significant increases in inflation.
The European Union statistics office Eurostat said Friday that preliminary annual headline inflation in the euro-area rose to 3.4% in September, the most in 13 years. Last month’s growth rate beat both the market forecast of 3.3% and the 3.0% reported in August.
Preliminary core inflation last month also jumped to its highest level since 2008 with a reading of 1.9%, which surpassed the 1.8% estimate and the August’s 1.6%.
The European Central Bank inflation target is 2% over the medium term, but the bank and a wide range of its officials have repeatedly stated that current price increases are likely transitory.
Eurostat said the annual growth rate for energy prices in September soared to 17.4% versus 15.4% in August. On Friday, European natural gas prices set another record, the second this week.
Andreas Wallström, head of forecasting at Swedbank, tweeted: “The high inflation is largely due to extreme base effects (with prices falling a year ago), which will fade over the coming months and in particular as from next year.”
But the breadth of the current price push is concerning, noted Carsten Brzeski, ING’s head of macroeconomics. “The surge in headline inflation is still mainly driven by so-called one-off factors such as higher energy prices, the German VAT reversal or price mark-ups post-lockdown in the leisure and hospitality services. However, higher inflation has been spreading across the entire economy, with almost half of the major 100 components in the consumer price basket recording inflation rates of above 2%.”
Temporary or here to stay?
Brzeski noted that some one-off factors are likely to fizzle next year but warned that inflation could turn out to be stickier than the “transitory” camp currently assumes. “We see two kinds of second-round effects materialising, keeping inflation higher than expected next year. The first is the pass-through from higher producer prices to consumer prices. In the past, producers absorbed higher costs by squeezing profit margins. This time around, they seem to be willing to pass on higher costs to consumers as illustrated by the fact that selling price expectations in both the manufacturing and services sector are currently at or are close to record highs.
“The second pass-through channel will be wages. The mismatch in the labour market between the lack of skilled workers and still high unemployment rates as well as a re-regionalisation of production as a result of supply chain frictions could give rise to higher wages.”
That Eurozone inflation would rise in September seemed like a given following the release of consumer price data from the currency bloc’s major economies on Wednesday and Thursday. Germany reported annual EU-harmonised inflation of 4.1%, its highest since the country began issuing numbers adjusted for comparison among member states in 1997. Consumer prices in Spain jumped 4% last month, their highest increase in 13 years. September inflation in Italy hit 3.0%, with France close behind at 2.7%