Inflation reaches a record high of 7.5% in countries using the euro
BRUSSELS — Inflation hit a record high in April for the 19 countries that use the euro as soaring fuel prices spurred by war in Ukraine weigh on the region’s economic recovery from the coronavirus pandemic.
Annual inflation reached 7.5% for the month, surpassing the old record of 7.4% in March, statistics agency Eurostat said on Friday. The April figure was the sixth consecutive record high reported for the euro zone.
Eurostat said energy prices jumped 38%, an indication of how Russia’s invasion of Ukraine is affecting the euro zone’s 343 million people. Rising European prices reflect some of the same factors that pushed US annual inflation to 8.5% in March, the highest since 1981.
Fears that the war could lead to an interruption in oil or gas supplies to Russia, the world’s largest oil exporter, have driven up oil and natural gas prices. The uncertainty comes on top of a rebound in global demand during the post-pandemic recovery and a cautious approach to increasing production from the OPEC oil cartel and allied nations, including Russia.
Bottlenecks in the supply of raw materials and parts also contributed to higher prices.
Governments as well as households are feeling the effects of high inflation. Germany is waiving renewable energy support charges on electricity bills, saving a family of four around 300 euros ($317) a year. Germany’s industrial union IG Metall is proposing an 8.2% annual raise for the country’s steelworkers who enter wage negotiations.
Right-wing French leader Marine Le Pen has made inflation a key issue in her unsuccessful challenge to President Emmanuel Macron in the French presidential election this month.
Concerns about even higher prices for heating, electricity and car fuel are one of the factors preventing European governments from deciding to stop energy imports from Russia as part of the sanctions against the Kremlin’s invasion of Ukraine.
“The war in Ukraine is a major setback to the economic recovery of the euro zone,” said Tej Parikh, director of the economics team at Fitch Ratings.
Inflation is also putting uncomfortable pressure on the European Central Bank to consider raising interest rates from record lows in the coming months. Higher rates to stifle inflation could also weigh on a recovery that has been rattled by the energy crisis, war and recent COVID-19 outbreaks.
Eurostat said economic growth slowed to 0.2% in the first three months of the year as voluntary and government restrictions during the spread of the highly contagious omicron variant of the coronavirus combined with higher inflation. high to curb demand as people used less in-person services. The first quarter figure was down from 0.3% in the last three months of 2021.
Among major European economies, Germany grew 0.2%, avoiding a recession after output fell 0.3% at the end of 2021. France stagnated at zero growth, government restrictions during the wave omicron affecting the activity. The Italian economy shrank by 0.2% due to lower exports.
The war, which began on February 24, more than halfway through the quarter, is expected to weigh on growth in the coming months.
“Rising inflation and the fallout from the war in Ukraine mean GDP is set to contract” in the second quarter, “while the further sharp increase in underlying inflation in April strengthens the case for a rate hike in July,” according to the ECB, Andrew Kenningham, chief European economist at Capital Economics, said.
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