Inflation accelerated rapidly in the eurozone after Russia launched its full-scale invasion of Ukraine in early 2022 and peaked at more than 10% in 2022.
Energy costs in particular shot up after the invasion caused gas prices to spike with a knock on effect on the cost of industrially produced goods and imports.
After two years, eurozone inflation stands now at 2.5% in June, down from 2.6% in May.
The European Central Bank (ECB), tasked with maintaining price stability, lowered its key interest rates by 0.25 percentage points for the first time in June since inflation hit the euro area.
If inflation falls in the eurozone as a whole, it would give the ECB leeway to cut key interest rates further over the course of the year. The ECB considers the 2% inflation mark a key target.
ECB President Christine Lagarde sought to dampen expectations of further interest rate cuts at a conference in Portugal earlier this week.
“It will take time for us to gather sufficient data to be certain that the risks of above target inflation have passed,” she said.
The European Banking Authority (EBA) is also cautious and warned credit institutions about the “high uncertainty” surrounding economic growth, interest rates and geopolitical risks.
Eurostat: Inflation eases year on year in the eurozone
On July 2, Eurostat, the EU statistics office, published its monthly provisional data estimate showing the inflation rate in the eurozone standing at 2.5% year-on-year in June, down from 5.5% in 2023.
The eurozone is made up of 20 of the 27 EU member states using the euro currency. Bulgaria, Czech Republic, Hungary, Poland, Romania and Sweden are currently non-members.
Eurostat’s latest data estimates found Belgium (5.5%), Spain (3.5%), Croatia and the Netherlands (both 3.4%) with the highest Harmonised Index of Consumer Prices (HICP) percentages in June.
Finland (0.6%), Italy (0.9%) and Lithuania (1.0%) registered the lowest.
The HICP helps with international comparisons of consumer price inflation and gives a comparable overview of how much goods and services purchased by households in the European Union cost over time.
Looking across the eurozone
In France, where the second round of early legislative elections will be held on July 7, energy prices have a role in the campaigns as gas and electricity have contributed to fuelling inflation and burdened the French budget in recent years.
Preliminary data by the National Institute of Statistics and Economic Studies (Insee) in France suggests that over a year, the Consumer Price Index should rise by 2.1% in June 2024, after +2.3% in May.
The slowdown in food and energy prices over the year could explain this slight ease of inflation. Prices of services, manufactured products and tobacco are expected to rise year on year.
In Germany, preliminary June inflation figures by Germany’s Federal Statistical Office released on Monday showed inflation easing again. The Consumer Price Index stood at 2.2% in June 2024 compared to 6.4% in June 2023.
Core inflation, which excludes volatile prices for food and energy, amounted to 2.9%. While services in particular got more expensive, energy became cheaper in June.
Households’ purchasing power has risen by 3.3% in the first quarter of 2024 in Italy compared to the previous one as inflation has come down according to ISTAT, the Italian National Statistical Institute.
However, greater spending power does not always translate into more purchases, gross disposable income rose by 3.5% but consumer spending only grew by 0.5%.
Based on ISTAT’s preliminary estimates for June, the HICP increases by 0.2% on a monthly basis and by 0.9% on an annual basis (from +0.8% in the previous month).
According to the National Institute of Statistics (INE) in Spain, the Consumer Price Index stood at 3.4% in June showing a slight decrease in the year-on-year comparison to June 2023 at 3.6%.
The INE attributed this evolution to lower fuel prices and – while food prices increased – they did so to a lesser extent than in the same month of 2023.
However, “entertainment and culture” offers have become more expensive in June compared to the same month in 2023.
In recent years, inflation in Croatia has been slightly higher than the average of the eurozone, which Croatia joined on January 1, 2023, but lower than in EU countries outside the euro area.
According to the estimates of the National Bureau of Statistics, the prices of goods and services for personal consumption, according to the first estimate in June 2024 compared to June 2023, are on average 2.4% higher.
Outside the eurozone: Sweden, Romania, Bulgaria
In Sweden, the government is cautiously claiming victory over inflation while worrying about the labour market as well as the food industry.
“It has been a tough winter," said Swedish finance minister Elisabeth Svantesson at a press conference last weekend, "even if the sun is shining now it’s still not summer in the Swedish economy. We still have a lot of challenges. Unemployment is way too high."
Svantesson added that competition in the food sector was “too weak” which leads to “higher prices for consumers."
Sweden currently has the third highest rate of unemployment in the European Union, after Spain and Greece.
The National Institute of Statistics‘ (INS) June data shows the inflation rate in Romania at 5.1% in May, down from 5.9% in April. Prices for food, non-food and services increased.
According to Eurostat, Romania was the country with the highest inflation in the EU in the first four months of 2024.
In Bulgaria, the country's inflation rate occupies talks around country’s potential accession to the eurozone.
On June 26, the European Commission said that Bulgaria does not meet the price stability criterion for adopting the euro, according to the ECB's analysis.
EU entry candidates: Albania, North Macedonia, Bosnia and Herzegovina, Serbia
In Albania, the increase in prices has slowed down, allowing breathing space for consumers, after the large increase experienced two years ago.
In May, core inflation dropped to 2.3%, from 3.2% at the end of last year and 5.4% in the same period a year ago. The increase in core inflation is the lowest since October 2021.
The annual inflation rate in Bosnia and Herzegovina (BiH) remained stable at 2% in April, according to the latest data from the Agency for Statistics of Bosnia and Herzegovina.
However, the Central Bank of Bosnia and Herzegovina predicts that overall inflation will increase to 2.9% in the third quarter.
The economy of BiH is small and heavily dependent on the EU, its largest trading partner. Therefore, economic trends within the EU are closely monitored. Economic experts see high product prices as a result of excessive dependence on food imports.
North Macedonia’s annual inflation rate stood at 4.5% in May 2024, the highest since September 2023, up from 4% in April.
The increase is mainly driven by accelerated prices for transportation, housing and utilities and restaurants and hotels.
In contrast, prices eased for food and non-alcoholic beverages, alcoholic beverages and tobacco as well as clothing and footwear.
On a monthly basis, consumer prices increased by 0.9% in May, after a 0.7% increase in the previous month.
The National Bank of Serbia (NBS) announced that according to the data of the Republic Institute of Statistics, year-on-year inflation in Serbia slowed down to 4.5% in May, which, in accordance with the projections of the central bank, returned to the limits of the target deviation.
According to the current projection, the NBS expects inflation to continue to slow down until the end of the year.
The content of this article is based on reporting by AFP, AGERPRES, ANSA, ATA, BTA, dpa, EFE, Europa Press, FENA, HINA, MIA, STA, Tanjug, TT as part of the European Newsroom (enr) project.
