Invasion of Ukraine continues to fuel eurozone inflation
In the last month, inflation in the eurozone reached an all-time high. According to data from Eurostat, inflation reached 8.9% in July after hitting 8.6% in the previous month.
The figures show that core inflation, which gives a better idea of how everyday spending is affected as it excludes volatile items, was 4%. This is the highest level recorded since the euro was introduced as a single currency in 1999.
In most eurozone countries, prices continued to rise during July. This was partly due to the war in Ukraine causing disruption to the global energy markets.
Gas prices have been climbing for some time, and energy inflation was 39.7% in July. This is now having a knock-on effect on other industries, including food.
China’s zero-Covid policies have also worsened the food crisis, including ongoing lockdowns, which have disrupted supply chains for everyday products.
Inflation across the eurozone
The data shows that in Greece, Spain, Estonia, Belgium, Cyprus, the Netherlands, Latvia, Slovakia, Slovenia, and Lithuania, inflation was higher than 10%.
In Germany, inflation was 8.5%, in France, it was 6.8%, and in Italy, it was 8.4%. The Baltic countries had the highest inflation – Estonia, Lithuania, and Latvia had inflation of over 20% in July due to their heavy reliance on energy imports.
Eurozone growth in 2022
GDP data released last month shows that in the eurozone’s second quarter of 2022, growth was 0.7%.
Germany saw 0% growth and France grew by 0.5%. However, Portugal, Latvia, and Lithuania all registered negative growth.
In a tweet, Paolo Gentiloni, European Commissioner for the economy, commented: “Good news! Euro area economy outperforms expectations in Q2. Uncertainty remains high for the coming quarters: need to maintain unity [and] be ready to respond to an evolving situation as necessary.”
It is still unclear when the energy crisis, which has a significant impact on inflation and economic growth, will begin to ease. Russia is continuing to interrupt gas supplies in retaliation for Western sanctions and, if this continues, the EU will need to prepare for the worst-case scenario.