Eurozone inflation reaches 10% year-on-year for the first time since World War II

Among the areas most affected by this phenomenon is the Eurozone, where inflation is now measured in double digits for the first time since World War II. Year-on-year, the consumer price index rose by 10% in September, up from 9.7% in August.

All items rose, with alcohol and tobacco up 11.8 percent, energy up 40.8 percent, nonindustrial goods up 5.6 percent, and services up 4.3 percent.

Steady reductions

While energy is a major contributor to the increase (40.8% y-o-y), continued reductions in natural gas deliveries from Russia to the EU and the loosening of supply chains caused by the recent Covid-19 blockades have pushed companies to the brink of profitability.

In addition, high utility, food and fuel costs are leaving consumers with less money to save, invest or spend on other things, which in turn could lead to a deeper and longer recession in the eurozone.

Serious risks

The European Central Bank (ECB) may soon find itself helpless in the face of ever-rising inflation. Earlier, the ECB said the eurozone was facing “serious risks“to financial stability due to the weakening of the euro, which could result in reduced investment and possibly a collapse of the housing market due to high energy prices and high rates.

It is hard to predict anything other than another 75 basis point (bp) rate hike by the ECB at its next meeting in October. In September, 10 of the 19 eurozone countries experienced double-digit inflation, with Estonia, Lithuania and Latvia leading the way with 24.2%, 22.5% and 22.4% inflation, respectively.