The eurozone’s inflation rate was 8.9 per cent during July as compared to the same month last year, due to the price of energy surpassing new highs and many of the biggest economies grew faster than forecast during the second quarter, except the traditional engine of Europe, Germany, which stalled.
The prices in the 19 countries that utilize that common European currency have risen by a significant amount from the 8.6 per cent mark that they reached in June. Their economies increased by 0.7 per cent during the period from May to June in comparison to the same period in the past the latest figures from the official release on Friday revealed.
Germany the largest economy in Europe was sluggish during the second quarter because of trade slowdowns and the country was battling intermittent, irregular natural gas supplies from Russia. Germany continues to receive almost three-quarters of its gas supply from Russia and the high prices for energy caused by Russia’s conflict in Ukraine have hit the German economy particularly severely.
In Europe countries whose economies didn’t depend as much upon fossil fuels as Russia experienced higher growth during the same timeframe, changing the direction of Europe’s economic story, in which Germany is the primary driving force behind growth.
France, Italy and Spain — all of which have an impressive tourism industry has seen growth in the economy during the period of April to June that surpassed the expectations of analysts. The French economy grew 0.5 per cent from the beginning quarter, Italy’s was up 1 per cent and Spain’s by 1.1 per cent.
This week, Germany reported annual inflation rose to 8.5 per cent, up from 8.2 per cent in the previous month in the wake of further reductions in natural gas supply from Russia have raised fears that already-record energy prices could rise even more.
The latest figures appear to back the decision taken last week by the European Central Bank’s Governing Council to take a significant step to combat the rising cost of living by raising the interest rates of its three banks by a one-half percentage point, the first rate increase in over a decade.
The bank is expected to keep raising rates at its next meeting in an effort to curb rising prices amid growing concerns about the economic slowdown.
“With inflation not showing any signs of cooling off in the short term and with the economic outlook not yet derailing, we expect another increase” by half a per cent when the central bank will meet again on September 1, Nicola Nobile of Oxford Economics wrote in a note.
On Thursday, the latest figures revealed the U.S. economy shrank for the second consecutive quarter, triggering fears that the nation might be in the midst of a recession, perhaps, one that was already in the process of beginning.
G.D.P. decreased by 0.2 per cent during the second quarter, after a decrease in the first quarter of 0.4 per cent in the previous quarter. Inflation is also soaring across the United States, the Federal Reserve has increased the key interest rate by three-quarters of a per cent at the last two meetings, with further increases to follow.