Euro area annual inflation up to 9.1% in august. Core inflation increasing from 4% to 4.3%
Euro area annual inflation is expected to be 9.1% in August 2022, up from 8.9% in July according to a flash estimate from Eurostat, the statistical office of the European Union.
Looking at the main components of euro area inflation, energy is expected to have the highest annual rate in August (38.3%, compared with 39.6% in July), followed by food, alcohol & tobacco (10.6%, compared with 9.8% in July), non-energy industrial goods (5.0%, compared with 4.5% in July) and services (3.8%, compared with 3.7% in July).
Excluding energy, inflation increased to 5.8% (vs 5.4% in July) and excluding energy, food, alcohol and tobacco, inflation also increased to 4.3% (vs 4%).
According to Bert Colijn, Senior Economist ING Bank for Eurozone, demand-side inflation remains weak in the eurozone.
The output gap is still negative, household consumption is well below pre-pandemic levels and retail sales have in fact been on a declining trend since November.
The latest negotiated wage growth data for 2Q came in at 2.1%, which means there is no evidence of a wage-price spiral at this point, but that the eurozone is mainly facing an unprecedented squeeze in real incomes.
″As the economy is slowing rapidly – and perhaps already contracting at this point – the question is how much the ECB needs to slam the brakes.
Another hike of at least 50 basis points in September seems to be a done deal, with the hawks pushing for 75bp.
The big question is how the ECB will respond after this, if indeed signs of economic distress become more apparent, and inflation remains highly driven by supply-side factors,″ concluded Bert Colijn.