Inflation in Europe Reaches a Record 10.7% as Officials Face Hard Options

“I expect this to reinforce the division inside the European Central Bank’s governing council,” Lucrezia Reichlin, an economics professor at the London Business School, said of this latest report from Eurostat, the commission’s statistical office.

The combination of higher-than-expected inflation and output, she said, suggests that supply shortages are not the sole problem; increasing demand from consumers is also contributing to rising prices.

Painfully high energy and food prices continued to push inflation to record levels. Over the past 12 months, energy prices rose by 41.9 percent while food prices increased by 13.1 percent. With Russia’s withdrawal from an agreement that allowed grain exports from Ukraine, grain prices are likely to go up even more.

Further worrisome are signs that inflation is broadening its reach to other sectors.

More than half of the eurozone countries recorded double-digit inflation rates in the year through October, including Germany (11.6 percent); the Netherlands (16.8 percent); Italy (12.8 percent) and Slovakia (14.5 percent). In the Baltic countries, rates spilled past 21 percent. France showed the lowest rate of 7.1 percent.

Consumer spending in part drove Germany, Europe’s largest economy, to a 0.3 percent annual growth rate during the third quarter. Italy’s economy grew by 0.5 percent, and Sweden’s by 0.7 percent. Overall output slowed from the 0.8 percent recorded over the prior three-month period. Elsewhere, growth slowed in the third quarter: Output in France and Spain each increased by just 0.2 percent, while the economies of Austria and Belgium shrank by 0.1 percent.

In the larger bloc of 27 countries that make up the European Union, third-quarter growth increased by 0.2 percent, the same as in the eurozone.

Article source: https://www.nytimes.com/2022/10/31/business/economy/eurozone-inflation-gdp.html