Inflation hits a record 10% in 19 EU countries using the euro

FRANKFURT, Germany — Inflation in European countries using the euro soared into the double digits as electricity and natural gas prices soared, signaling an impending winter recession for one of the world’s major economies, the rising prices undermining consumers’ purchasing power.

Consumer prices in the 19 eurozone countries rose a record 10% in September from a year earlier, compared with 9.1% in August, the statistics agency reported on Friday. EU Eurostat. Only a year ago, inflation was only 3.4%.

Price increases exceeded market analysts’ expectations and are at their highest level since record-keeping for the euro began in 1997. Energy prices were the main culprit, rising 40, 8% a year ago. Prices for food, alcohol and tobacco jumped 11.8%.

“I’m already looking for a lot more specials,” said 64-year-old trainer and staff development coach Myriam Maierhofer, who was shopping at the weekly open-air market in Cologne, Germany, on Thursday. “I don’t throw away as much so fast, so I’ve become more frugal with food. And this morning, I also lowered the heating in the bedrooms.

Inflation has been fueled by steady cuts in natural gas supplies from Russia and bottlenecks in the supply of raw materials and spare parts as the global economy rebounds from the COVID-19 pandemic . The Russian cuts have sent gas prices skyrocketing to the point where energy-intensive companies such as fertilizers and steel say they can no longer manufacture certain products at a profit.

Meanwhile, high prices for utility bills, food and fuel are leaving consumers with less money to spend on other things. This is the main reason why economists are predicting a recession, or a severe and lasting slowdown in economic activity, for the end of this year and the first months of next year.

The European Central Bank raises interest rates to fight inflation by preventing rising prices from filtering into people’s wage and price expectations, but it alone cannot drive down prices. energy price.

Friday’s inflation reading was likely to be a matter of “serious concern” for the ECB, said Jessica Hinds, senior Europe economist at Capital Economics. She said the central bank’s rate-setting board would likely raise its benchmark rates by three-quarters of a percentage point at its next meeting on Oct. 27.

Higher interest rates make it more expensive for individuals and businesses to borrow, invest and spend, which dampens demand for goods and thus limits inflation. Inflation is well above the ECB’s 2% target considered best for the economy.

European officials are calling Russia’s natural gas cuts an energy blackmail aimed at pressuring and dividing European governments over Western sanctions and their support for Ukraine. Russia blames technical problems.

The resulting rise in gas prices means higher heating bills and higher electricity costs, as natural gas is used to generate electricity, heat homes and run factories.

European Union energy ministers on Friday adopted a one-off profit levy on fossil fuel companies and other measures to ease the energy crisis, while some countries also allocated hundreds of billions to come assistance to households and businesses.

As consumer prices in Germany rise 10.9%, hitting double digits for the first time in decades, the government has announced plans to spend up to 200 billion euros ($195 billion) to help cope with rising gas bills in Europe’s biggest economy.

Chancellor Olaf Scholz said on Thursday the government was reactivating an economic stabilization fund previously used during the global financial crisis and the coronavirus pandemic.

Christian Schrader, 35, who shopped at the Cologne market, was less worried about food prices, but said that “you start thinking about which rooms in the apartment need to be heated and try to explain to children that we only play in one play.”

A bigger concern was “the social dimension,” he said. “Inflation has often been an engine of social division, of extreme tendencies, of populism. This dimension worries me more.


AP reporter Daniel Niemann contributed from Cologne, Germany.

ABC News

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