Eurozone inflation hit a new record this month, in line with expectations, an uncomfortable reading for European Central Bank (ECB) policymakers already worried that rapid price growth could consolidate, creating a price and wage spiral that is difficult to break.
Inflation in the 19-nation currency bloc rose to 7.5% in April from 7.4% in March, in line with expectations, driven by a persistent rise in energy and food prices, data from the statistics agency of the European Union Eurostat this Friday (29).
While volatile energy costs made the biggest contribution, the rate of energy inflation actually declined from March, while growth in prices for food, services and non-energy industrial goods accelerated further, suggesting that inflation is becoming wider and wider.
Underlying prices, which filter volatile energy and food prices, have also increased, raising ECB concerns that high inflation may be hard to beat and that a nearly decade-long struggle with ultra-low price growth is over.
Inflation excluding food and fuel prices, closely watched by the ECB, rose from 3.2% to 3.9%, while a more restrictive measure, which also excludes alcohol and tobacco products, jumped from 2.9% to 3.5%. Both numbers were well above expectations.
Preliminary data shows war in Ukraine constrains eurozone growth in Q1
Eurozone economic growth was lower than expected in the first three months of the year as the war in Ukraine, which started on February 24, impacted activity in the region.
Eurostat said the Gross Domestic Product of the 19 countries sharing the euro grew by 0.2% from the previous quarter, up 5.0% year-on-year. Economists polled by Reuters had expected quarterly growth of 0.3%.
The European Commission had also predicted just before the Russian invasion that growth would be 0.3% compared to the previous quarter, so preliminary Eurostat data, if confirmed ahead, suggest that the war and price spikes in conflict-related commodities reduced growth by 0.1 percentage point.
Eurostat said Italy’s economy contracted by 0.2% in the first quarter from the previous three months, which would make it the biggest victim of the eurozone conflict. In February, the Commission predicted that Italy would grow by 0.3%.
Germany, whose first-quarter growth had been projected at 0.4% by the Commission, grew by just 0.2%, Eurostat said. France, on the other hand, did not grow, compared to a forecast of expansion of 0.1%.
See images of the Russian invasion of Ukraine
Source: CNN Brasil
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