stopped in its slowdown, inflation remained stable in August at 5.3% over one year

2023-08-31 09:52:00

The annual inflation rate in the euro zone remained stable in August at 5.3%, as in July, despite a drop in energy prices and a slight slowdown in the soaring food prices, announced Eurostat, this Thursday August 31.

« Regarding the main components of inflation in the euro zone, food, alcohol & tobacco should experience the highest annual rate in August (9.8%, compared to 10.8% in July), followed by services (5.5%, compared to 5.6% in July), industrial goods excluding energy (4.8%, compared to 5.0% in July) and energy (-3.3%, compared to -6.1% in July) “, we detail.

Euro zone: “Underlying inflation has probably peaked” (ECB)

The data released on Thursday marks a pause in the slowdown in inflation that had continued uninterrupted since May. The reason is energy prices, which continue to fall from the very high levels reached last year, but less markedly than in previous months. Their fall was limited to 3.3% in August, against 6.1% in July.

Inflation in the 20 countries sharing the single currency has been halved since the record 10.6% reached in October 2022 when the effects of the war in Ukraine on gas and oil prices were felt in full. Nevertheless, the figure announced on Thursday remains higher than the expectations of analysts from Factset and Bloomberg, who on average expected a slowdown to 5.1%.

A new rate hike in prospect?

Result, the euro lost some ground against the dollar on Thursday, investors remaining in uncertainty before the publication of the PCE index of price increases in the United States. Around 9 a.m. GMT (11 a.m. in Paris), the euro lost 0.43% to 1.0876 dollars.

It is difficult, in this context, to anticipate a loosening of the monetary policy of the European Central Bank (ECB), which has set itself the objective of bringing inflation down to 2%. Interest rates will have to be fixed at a sufficiently restrictive level for as long as necessary to bring inflation back to its target, hammered its president Christine Lagarde at the US Fed forum in Jackson Hole, Wyoming.

The institution has raised rates nine times in a row since July last year, bringing the benchmark rate on banks’ excess deposits to 3.75%. At the end of July, however, the ECB had opened the door to a possible pause in the coming months, which will depend on the economic data available.

ECB: how far to raise rates to bring inflation down to 2%? And should we cling to this objective?

Unemployment rate at historic low

The unemployment rate in the euro zone remained stable in July compared to June, at 6.4% of the active population, according to Eurostat data published on Thursday. The indicator is at its lowest level since the European statistics office began compiling this series in April 1998 for countries that have adopted the single European currency. It is down by 0.3 points compared to June 2022. For the whole of the European Union, the unemployment rate rose to 5.9% in July, as in June.

Unemployment has fallen significantly in Europe since mid-2021, thanks to the strong post-Covid economic recovery that followed a historic recession. Despite economic stagnation in the euro zone from the end of 2022, fueled by the consequences of the war in Ukraine and the surge in inflation, unemployment continued to fall before stabilizing since the spring at a level unprecedented in a quarter of a century. Some 12.9 million men and women were unemployed in July within the twenty-seven Member States of the EU, including 10.9 million among the twenty countries sharing the single currency.

(With AFP)