High energy prices cause inflation to surge again: +0.4 per cent in August

Brussels – Bad news for consumers and businesses in the eurozone: in August, inflation rose by 0.4 percentage points from July, reaching 3.3 per cent (up from 2.9 per cent). Preliminary data from Eurostat leave no room for doubt: the war in Iran, with its repercussions on the energy market, is weighing on the overall trend in the cost of living. What emerges from looking at the main components of the reference basket is the surge in the ‘energy’ category (14.3 per cent in August from 10.3 per cent in July). The ‘non-energy industrial goods’ category also rose (1.2 per cent from 0.9 per cent in July). The cost of food, alcohol and tobacco remained stable (1.2 per cent), while the ‘services’ category recorded an easing (3.0 per cent, from 3.3 per cent in July). 

This is not the first time that high energy prices have driven overall inflation. It had already happened in July, when rising energy prices were a key factor in pushing up the cost-of-living index. However, this time the rise is more pronounced and could well prompt the European Central Bank to raise interest rates at its 10 September meeting, as previously signalled. The final inflation figures for August will only be published on 17 September, and the ECB will have to rely on provisional data, which are nonetheless indicative of the situation.

Among the major economies of the eurozone, sharper rises are expected in Spain (from 3.9 per cent in July to 4.5 per cent in August) and Italy (from 2.9 per cent to 3.2 per cent). France is set to see a rise of 0.3 percentage points (from 2.4 per cent to 2.7 per cent), whilst Germany is expected to see a minimal increase of 0.1 percentage points (from 2.8 per cent to 2.9 per cent). Rising energy costs are undoing the progress made by Bulgaria: the country, which has recently adopted the euro, saw inflation fall from 5.2 per cent to 4.4 per cent between June and July, but inflation is expected to be 5.1 per cent in August.