The surge in inflation figures for December was primarily driven by increasing service prices, despite being somewhat balanced by declining costs in food, alcohol, and tobacco products.
According to Eurostat, the annual inflation rate for the eurozone hit 2.4% in December, confirming earlier estimates. This marks the third consecutive month of rising inflation and reflects an increase from November’s 2.2%, making it the highest rate since July.
The increase in December’s inflation is largely attributed to base effects, as this year’s annual rates no longer account for last year’s drop in energy prices.
Energy costs rose slightly by 0.1% in December, a shift from the -2% reported the previous month, representing the first positive reading since July. Additionally, inflation in services edged up to 4% in December from 3.9% in November.
Conversely, the inflation rates for alcohol, food, and tobacco saw marginal decreases. The rise in processed food prices was partially counterbalanced by lower prices for non-processed foods, leading to an overall reduction in these categories.
In individual country performance, German inflation reached 2.8% in December, an increase from 2.4% in November, while French inflation rose to 1.8% from 1.7%. In Italy, however, inflation fell to 1.4%, down from 1.5% the previous month.
The core inflation rate across the eurozone remained stable at 2.7% in December, consistent with the previous three months and aligning with analyst predictions. This core figure excludes alcohol, tobacco, food, and energy prices due to their fluctuating nature.
What is Driving the Inflation Increases in Germany and France?
Germany’s rise in inflation can be primarily linked to escalating prices in food and services. Furthermore, energy prices have been slower to decrease, exacerbating the inflationary pressure.
France faces similar economic challenges, particularly with rising electricity tariffs amplifying inflation. Compounding this are ongoing supply chain disruptions and a lack of consumer and business confidence, creating a challenging market environment.
Italy’s decline in inflation is attributed to decreases in prices for industrial goods and services.
Photo credit & article inspired by: Euronews
