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Inflation hits 9.1% in countries using euro currency

Inflation in the European countries using the euro currency hit another record in August, fuelled by soaring energy prices mainly driven by Russia’s war in Ukraine.

Annual inflation in the eurozone’s 19 countries rose to 9.1 per cent, up from 8.9 per cent in July, according to the latest figures released Wednesday by the European Union statistics agency Eurostat.

Inflation is at the highest levels since record-keeping for the euro began in 1997. The latest figures add pressure on European Central Bank officials to continue raising interest rates, which can tame inflation, but also stifle economic growth.

Prices are rising in many other countries as Russia’s war in Ukraine grinds on, triggering unprecedented increases for energy and food that are squeezing household finances. Disruptions to global manufacturing supply chains caused by the coronavirus pandemic have also played a role in pushing up prices. This summer has seen a wave of protests and strikes around the world by workers pushing for higher wages and people fed up with the high cost of living.

Inflation in Britain, Denmark and Norway, which have their own currencies, is also surging, according to official data released earlier this month. United Kingdom residents face an 80 per cent jump in annual household energy bills, regulators warned last week.

Inflation is also high in the United States, adding urgency for the Federal Reserve to keep raising interest rates. Prices were up 8.5 per cent in July compared with a year earlier, though that was lower than 9.1 per cent in June.

In the eurozone, energy prices surged 38.3 per cent, though the rate was slightly lower than the previous month, while food prices rose at a faster pace of 10.6 per cent, according to Eurostat’s preliminary estimate. The agency’s final report, released about two weeks later, is usually unchanged.

“Specific European problems continue to push inflation higher,” ING Bank senior economist Bert Colijn wrote in an analyst note. “The gas supply crisis and droughts are adding to persisting supply-side pressures on inflation at the moment.”

Russia, a major energy producer, has been reducing the flow of gas to European countries that have sided with Ukraine in the war, a move that’s wreaked havoc with prices.

At the same time, nearly half of Europe has been afflicted by an unprecedented drought that’s hurting farm economies, crimping production of staple crops like corn, and driving up food prices.

Price rises for manufactured goods like clothing, appliances, cars, computers and books accelerated to 5 per cent, and the cost of services rose 3.8 per cent.

The euro’s weakness is another factor keeping prices high. The currency has slipped below parity with the dollar, which can make imported goods more costly, particularly oil, which is priced in dollars.

– AP

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