Eurozone Inflation Edges Lower, but Pressure on Prices Continues
The grim economic outlook for Europe that had been predicted last fall has considerably brightened. Fears of a deep recession turned out to be overblown. Vertigo-inducing energy prices have dropped thanks in part to a warm winter and conservation efforts. Still, the road is bumpy.
What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.
Is inflation bad? It depends on the circumstances. Fast price increases spell trouble, but moderate price gains can lead to higher wages and job growth.
How does inflation affect the poor? Inflation can be especially hard to shoulder for poor households because they spend a bigger chunk of their budgets on necessities like food, housing and gas.
Can inflation affect the stock market? Rapid inflation typically spells trouble for stocks. Financial assets in general have historically fared badly during inflation booms, while tangible assets like houses have held their value better.
Food prices remain high. The war between Russia and Ukraine, notable exporters of energy and agriculture, has squeezed the global food supply and disrupted fertilizer production. Uncertainty about whether Russia will continue to abide by an agreement to ease its blockade of Ukrainian ports is also fueling anxiety about the food supply.
Devastating droughts in Europe, China, the Horn of Africa and the United States caused by climate change have also contributed to smaller harvests and higher food prices.
Even Belgium, where inflation dropped to an annual rate of 5.5 percent last month, among the lowest in the eurozone, saw a rise in food prices.
In addition to food, inflation was driven by higher prices for alcohol, tobacco and services.
The Baltic countries continued to top the charts with annual inflation rates above 17 percent. Slovakia was next in line at 15.5 percent.
Article source: https://www.nytimes.com/2023/03/02/business/economy/eurozone-inflation-february.html