Inflation has increased unexpectedly in Britain. How are EU countries feeling the pinch?
Inflation unexpectedly rose in the UK in February, after a steady rise in food and energy bills, putting more pressure on households.
Contrary to the 9.9 percent decline economists had predicted, the consumer price index (CPI) rose to 10.4 percent from January’s 10.1 percent, but still less than October’s 41-year high of 11.1 percent.
On a monthly basis, CPI inflation stood at 1.1 per cent, one point higher than the estimated 0.6 per cent.
“The largest contributions to the monthly change in both the CPIH and CPI rates came from restaurants and cafes, food and clothing, partially offset by lower contributions from entertainment and cultural goods and services (particularly recording media), and motor fuel. ,” said Britain’s Office for National Statistics (ONS).
In the UK, the unexpected increase in February broke three consecutive months of slow growth in prices since October last year.
How is the Eurozone coping?
In the eurozone, inflation fell to 8.5 percent in February, according to Eurostat, bringing the total number of consecutive months of declines to five, despite increases in France, Germany and Spain.
Energy prices fell, but food and other products picked up the slack, according to Eurostat, the European Union’s statistics office.
Food, alcoholic beverages and tobacco registered a growth of 15 per cent in February, compared to 14.1 per cent a month earlier. Energy, on the other hand, recorded 13.7 percent, down from 18.9 percent in January.
The decline in the general index occurred despite the fact that, in February, three major European economies reported growth: in France, it rose from 7.0 to 7.2 percent, in Germany from 9.2 to 9.3 percent, and in Spain, it rose. 5.9 to 6.0 percent. The index went down in Italy, Belgium and Greece and other countries.
While the February figures are undoubtedly positive, inflation in Europe remains well above the European Central Bank’s (ECB) target of keeping the eurozone area below 2 percent.
Eurozone inflation hits new records every month from November 2021, driven by energy and food. The situation had worsened since the spring with market disruptions related to the war in Ukraine.
Unusually warm temperatures in the first autumn and winter meant that energy prices largely returned to pre-war levels, but energy was determined to be the main driver of inflation in Europe. In January, increased energy prices contributed 17.2 per cent to the overall rate of inflation, while food, alcohol and tobacco accounted for 14.1 per cent.
Hungary, in particular, experienced the highest level of inflation in the eurozone at an estimated 25.8 percent in February, up from 25.0 percent in December from 8.4 percent a year earlier.
The Baltic countries remain some of the hardest hit. Inflation in Latvia and Estonia remains high at 20.1 and 17.8 percent, respectively.
Czechia is also seeing high inflation at 18.4%, the highest in the Eurozone.
Inflation has increased in ten countries – Germany, Ireland, Spain, France, Malta, Netherlands, Poland, Slovakia, Finland and Sweden in February.
Here’s a look at the inflation rate in each country in Europe:
Following in the footsteps of its counterparts in other parts of the world, the European Central Bank (ECB) in July raised interest rates by a higher-than-expected amount for the first time in 11 years, as it targets extremely high inflation.
followed by another record rate hike In September, fresh questions were raised about whether the rush to make credit more expensive and keep inflation under control will drive major economies into recession.
On 27 October, the ECB raised interest rates again, raising its deposit rate by 75 basis points to 1.5 percent – the highest rate in more than a decade.
On 29 November, ECB President Christine Lagarde warned that inflation in the eurozone didn’t peak And the risk of rising even higher than anticipated – fueling expectations of further rate hikes.
“We are prepared to adjust all our tools to ensure that inflation returns to our medium-term inflation target,” he said last month.
What is the reason for these inflation rates?
Even before Russia’s invasion of Ukraine in late February, Europe and much of the world was already being hit by rising energy prices – which contributes to inflation.
The conflict has exacerbated an energy crisis by fueling global concerns it could disrupt supplies of oil or natural gas from Russia. Moscow said in September that it would not fully restore its gas supplies to Europe until the West lifted its sanctions.
Russia typically supplies about 40 percent of Europe’s natural gas.
Prices of many commodities – including crucially food – have also been rising since the COVID-19 pandemic lockdown was first imposed two years ago, straining global supply chains, leaving crops to rot and caused panic-buying in supermarkets.
The war in Ukraine again worsened the outlook dramatically, as Russia and Ukraine account for nearly a third of global wheat and barley and two-thirds of the world’s exports of sunflower oil used for cooking. Ukraine is also the world’s fourth largest exporter of corn.