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Wednesday, August 17, 2022
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Wednesday, August 17, 2022
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    Inflation hits record 8.9pc in 19 countries using the euro

    BRUSSELS (AP) – Inflation in the European countries using the euro currency shot up to another record in July, pushed by higher energy prices driven partly by Russia’s war in Ukraine, but the economy still managed some meager growth.

    Annual inflation in the eurozone’s 19 countries rose to 8.9 per cent in July, an increase from 8.6 per cent in June, according to the latest numbers published yesterday by the European Union (EU) statistics agency.

    Inflation has been running at its highest level since 1997, when record-keeping for the euro began.

    Energy prices surged by 39.7 per cent, slightly lower than the previous month, while prices for food, alcohol and tobacco rose by 9.8 per cent, faster than the increase posted last month.

    The eurozone’s economy, meanwhile, grew from April through June, expanding by 0.7 per cent compared with the previous quarter and up four per cent over the same period in 2021.

    Euro banknotes lie on a table in Munich, Germany. PHOTO: AP

    That contrasts with the United States (US), whose the economy has contracted for two straight quarters, raising fears of a recession with inflation at 40-year highs. But the job market is even stronger than before the COVID-19 pandemic, and most economists, including Federal Reserve Chair Jerome Powell, have said they don’t think the economy is in recession.

    Many, however, increasingly expect an economic downturn in the US to begin later this year or next, much like in Europe.

    Europe’s proximity to the war in Ukraine and its reliance on Russian energy mean it’s at risk of recession as Moscow throttles down flows of natural gas that power factories, generate electricity and heat homes in the winter.

    More reductions this week through a major pipeline to Germany, Nord Stream 1, have heightened fears that the Kremlin may cut off supplies completely. That would force rationing for energy-intensive industries and spike already record-high levels of inflation driven by soaring energy prices, threatening to plunge the 27-nation bloc into recession.

    Economists’ forecasts vary on the impact to economic output, especially country by country, but ING bank said the hit from a complete cutoff of Russian gas to the 19 countries sharing the euro would be one per cent to three per cent of GDP in the short run.

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