Inflation in the euro area crossed into double-digit territory this month following a significant rise in consumer price growth in Germany, the currency area’s biggest economy.
The preliminary reading from the EU statistics office showed Eurozone headline annual inflation spiking to a record 10.0%, a rise of nearly a full percentage point from August’s mark of 9.1%. the previous all-time high. Economists had forecast an increase to only 9.5%.
The core rate excluding energy, food, alcohol, and tobacco jumped more than expected to a record 4.8% versus the 4.7% estimate – and the 4.3% announced last month, which was also a record.
The growth rate of every major component of annual headline inflation increased, according to the stats office, with food, alcohol, and tobacco up more than a percentage point to 11.8%.
After three months of declines, energy prices rebound with 40.8% growth from 38.9% last month. The cost increase for services was up half a point to 4.3%, and unprocessed food price growth rose 1.7 points to 12.7%.
The latest data heaps even more pressure on the European Central Bank, which started its rate hike cycle with July's half-point increase to tamp down what has since become incandescent price growth in the euro area and added another 75 basis points earlier this month. The bank’s inflation target is 2% over the medium term.
“The jump in the Eurozone’s headline inflation rate in September into double digits will be of grave concern to the ECB,” wrote Jessica Hinds, senior Europe economist at Capital Economics. “Despite the weak economic outlook, we expect the bank to prioritise inflation and deliver another bumper rate hike next month.
“Much more worryingly for the ECB, the core inflation rate increased to a fresh record high.”
Mixed signals from major economies as German prices soar
According to preliminary data announced Friday morning, EU-harmonised inflation in France this month slowed unexpectedly to 6.5% from the August reading of 6.6%, which was also the estimate.
EU-harmonised inflation in Italy, which was announced concurrently with Friday’s Eurozone number – climbed to 9.5%, as expected, from 9.1%.
Preliminary EU-normed price growth in Spain fell more than expected this month, according to data released Thursday, with a decline to 9.3% versus the 10.1% estimate and 10.5% last month.
But it was initial data released Thursday by Germany that sent tremblers through Europe. The country said EU-harmonised inflation soared to 10.9% to handily beat the estimate of 10.2% and the 8.8% mark set in August. The jump was rooted in the elimination of cost reductions for train tickets and vehicle fuel.
Suspected attacks on the Nord Stream 1 pipeline that sends Russian natural gas to Europe has added concerns about further energy price growth in the months ahead, with Germany one of the EU nations most reliant on Moscow for supplies.
The worst is yet to come for Germany due the current – and possible ongoing – shutdown of the conduit, Deutsche Bank wrote, predicting 9% average inflation in 2023 versus 8% this year. Four leading German economic institutes said Thursday that inflation in the country would average 8.4% this year and 8.8% in 2023.
Measures to control price growth introduced by individual countries are muddying the overall inflation picture, but monetary policymakers in Frankfurt are looking past the stirred up silt, according to Bert Colijn, ING’s senior European economist. “With current high inflation rates, the trajectory is clear: the ECB is set to hike drastically at the coming meetings to get to neutral and possibly beyond quickly. First stop is the October meeting where another 75-basis point hike is now the most likely outcome.”
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- Annual headline rate now a record 10%
- Core rate grows to historic high of 4.8%
- German prices surge
- More ECB rate hikes ahead – analysts
By Eric Culp, European Editor
LiveSquawk News
@EricCulpLS
30 September 2022 | 10:00 GMT
Inflation in the euro area crossed into double-digit territory this month following a significant rise in consumer price growth in Germany, the currency area’s biggest economy.
The preliminary reading from the EU statistics office showed Eurozone headline annual inflation spiking to a record 10.0%, a rise of nearly a full percentage point from August’s mark of 9.1%. the previous all-time high. Economists had forecast an increase to only 9.5%.
The core rate excluding energy, food, alcohol, and tobacco jumped more than expected to a record 4.8% versus the 4.7% estimate – and the 4.3% announced last month, which was also a record.
The growth rate of every major component of annual headline inflation increased, according to the stats office, with food, alcohol, and tobacco up more than a percentage point to 11.8%.
After three months of declines, energy prices rebound with 40.8% growth from 38.9% last month. The cost increase for services was up half a point to 4.3%, and unprocessed food price growth rose 1.7 points to 12.7%.
The latest data heaps even more pressure on the European Central Bank, which started its rate hike cycle with July's half-point increase to tamp down what has since become incandescent price growth in the euro area and added another 75 basis points earlier this month. The bank’s inflation target is 2% over the medium term.
“The jump in the Eurozone’s headline inflation rate in September into double digits will be of grave concern to the ECB,” wrote Jessica Hinds, senior Europe economist at Capital Economics. “Despite the weak economic outlook, we expect the bank to prioritise inflation and deliver another bumper rate hike next month.
“Much more worryingly for the ECB, the core inflation rate increased to a fresh record high.”
Mixed signals from major economies as German prices soar
According to preliminary data announced Friday morning, EU-harmonised inflation in France this month slowed unexpectedly to 6.5% from the August reading of 6.6%, which was also the estimate.
EU-harmonised inflation in Italy, which was announced concurrently with Friday’s Eurozone number – climbed to 9.5%, as expected, from 9.1%.
Preliminary EU-normed price growth in Spain fell more than expected this month, according to data released Thursday, with a decline to 9.3% versus the 10.1% estimate and 10.5% last month.
But it was initial data released Thursday by Germany that sent tremblers through Europe. The country said EU-harmonised inflation soared to 10.9% to handily beat the estimate of 10.2% and the 8.8% mark set in August. The jump was rooted in the elimination of cost reductions for train tickets and vehicle fuel.
Suspected attacks on the Nord Stream 1 pipeline that sends Russian natural gas to Europe has added concerns about further energy price growth in the months ahead, with Germany one of the EU nations most reliant on Moscow for supplies.
The worst is yet to come for Germany due the current – and possible ongoing – shutdown of the conduit, Deutsche Bank wrote, predicting 9% average inflation in 2023 versus 8% this year. Four leading German economic institutes said Thursday that inflation in the country would average 8.4% this year and 8.8% in 2023.
Measures to control price growth introduced by individual countries are muddying the overall inflation picture, but monetary policymakers in Frankfurt are looking past the stirred up silt, according to Bert Colijn, ING’s senior European economist. “With current high inflation rates, the trajectory is clear: the ECB is set to hike drastically at the coming meetings to get to neutral and possibly beyond quickly. First stop is the October meeting where another 75-basis point hike is now the most likely outcome.”