No so long ago, the talk was that the Eurozone needed to take the baton, and propel the economy forward. Well, all of a sudden, it is as if the region has grabbed the wrong baton – and is instead running with a stick made of lead.
Inflation in the Eurozone has soared to 3.2 per cent – the highest level in 14 years. More to the point, it appears that core inflation is surging.
Capital Economics said, “Given probably-neutral energy effects and the favourable base effects of last year’s rise in German VAT, the increase suggests that core inflation may have picked up after being static for the last year or so.”
Remember, if CPI inflation hits 3.1 per cent in the UK, the Bank of England governor has to write a letter to the chancellor explaining what is going on. So Eurozone inflation of 3.2 per cent (it was 3.1 per cent last month) is very serious.
Even more worrying, consumer confidence in the region has fallen -9 to -12.
But, at least there is good news on unemployment. Last month, unemployment across the region hit a record low, and then yesterday revealed a sharp fall in German unemployment, which now stands at 8.1 per cent, the lowest level since 1992.
What is worrying, though, with all this data, is that the Eurozone really could do with a kick-start from reduced interest rates. This morning, the NIESR predicted growth of just 1.9 per cent this year, with Germany and France only managing 1.8 per cent and Italy 1.4 per cent. Yet, with inflation so high, it appears that for the time being, the European Central bank can not afford the luxury of a cut in rates.
Comments
Trackbacks