In May, inflation climbed to 8.1% over one year for the 19 countries that adopted the single currency, against 7.4% in April.
The war in Ukraine and Western sanctions against Moscow propelled energy and food prices to unprecedented levels, with a new inflation record beaten in May in the euro zone at 8.1% over one year.
Inflation reached 7.4% in April for the 19 countries that adopted the single currency. These figures are the highest recorded by the European statistics office since the start of the publication of the indicator in January 1997.
Consumer price inflation has hit record highs every month since November. However, it was announced last year as a temporary phenomenon, linked to the strength of the economic recovery after the shock of the pandemic and the disruption of supply chains.
The invasion of Ukraine by the Russian army at the end of February as well as the Western economic sanctions against Moscow reinforce the surge in prices and raise fears of a sharp drop in the growth of the gross domestic product (GDP).
The strengthening of inflation primarily affects the energy sector (electricity, oil, gas, etc.). This component of the price index jumped 39.2% over one year in May, after 37.5% in April.
“Energy inflation is likely to stay high longer than expected”, as the 27 leaders of the European Union reached an agreement overnight Monday to Tuesday on a gradual embargo on Russian oil imports, says Andrew Kenningham from Capital Economics.
But the increase in food prices (including alcohol and tobacco) is also accelerating to 7.5%, against 6.3% in April. They should “increase further in the coming months due to supply problems linked to Ukraine”, a major agricultural power whose crops are now largely immobilized by the blockade of the Russian navy in the Black Sea.
The acceleration in prices also affects industrial goods (+4.2%, after +3.8%) and services (+3.5%, compared to 3.3% the previous month).
France less affected
France is relatively less affected than its European neighbors, with 5.8% inflation in May, the second lowest rate in the euro zone behind Malta (5.6%), according to the consumer price index. consumption (HICP) calculated by Eurostat. Inflation reached 8.7% in Germany.
The highest rates are recorded in the Baltic countries: 20.1% in Estonia, 18.5% in Lithuania and 16.4% in Latvia, countries bordering Russia and particularly exposed to the severance of commercial ties with this country. country.
These figures have prompted European governments to intervene to protect consumers. Checks paid to employees, tax cuts, reductions in public transport or capping energy prices… The announcements have multiplied in recent months.
And no quick lull is in sight.
Brussels recently lowered its GDP growth forecast for the eurozone in 2022 by 1.3 points to 2.7% and increased its inflation forecast by 3.5 points to 6.1% compared to last figures announced on February 10 before the start of the Russian offensive.
The European Commission has warned that the situation could worsen further depending on the evolution of the conflict in Ukraine.
“Inflation is expected to peak in the second quarter and gradually slow over the rest of the year. But the agreement of the EU on a ban on Russian oil leads to a rise in crude oil and new risks” for consumer prices, say experts at Oxford Economics.
However, they want to be more optimistic for 2023. “Next year, the diversification of energy sources and the increase in global supply in a context of falling demand should bring prices down”, they predict, in expecting an inflation rate that would fall below the 2% mark.
Until then, interest rate hikes from the European Central Bank (ECB) are expected. The chief economist of the ECB, Philip Lane, judged “logical” an exit from negative rates in September, in the context of record inflation, evoking the possibility of two increases of “25 basis points” each, in July and in September, in an interview Monday with the Spanish business daily Cinco Días.