Inflation in Greece “jumped” to 10.7% in May from 10.2% in April. According to preliminary data announced by Eurostat, inflation in our country is boosted by prices for liquid fuels and electricity, but for several weeks now there has been a significant increase in prices for basic products such as food and detergents.
It is disappointing and, at the same time, worrisome that the rise in prices will not stop in the coming months. Imported inflation will continue to increase the cost of production, and with it the price of final products. Accordingly, the cost of energy will rise, based on world oil prices at this stage, as well as an increase in demand due to summer holidays and travel.
But the situation in the eurozone is no better: inflation jumped to 8.1% in May from 7.4% in April, according to preliminary data released by Eurostat on Tuesday.
Analysts are forecasting much smaller growth, to 7.8%. In Greece, inflation is estimated at 10.7% in May, compared to 10.2% in April, as reported.
Looking at the major components of inflation in the euro area, energy is expected to have its highest annual rate in May (39.2% compared to 37.5% in April), followed by food, alcohol and tobacco (7.5 % compared to 6.3% in April), non-energy manufactured goods (4.2% vs. 3.8% in April) and services (3.5% vs. 3.3% in April).
In this climate, central banks are in a difficult position to find a golden ratio in their monetary policy that will allow them to contain prices without slowing growth.
Record inflation in France at a time when the economy is shrinking
Inflation in France jumped to a new all-time high of 5.8% in May as rising energy and food prices shifted to other goods and services.
Data released in the eurozone’s second-largest economy, combined with data released on Monday by Germany and Spain, confirm inflationary pressures in Europe and make the work of the European Central Bank even more difficult.
They complicate the task because they have to decide in a short period of time how sharp a given increase in key interest rates will be, which will hit growth, creating new problems.
Meanwhile, a separate report showing that the French economy contracted 0.2% qoq in the first quarter of the year fuels inflation stagnation scenarios.
Germany shocked by inflation surge to half-century high
Germany experienced this level of inflation nearly half a century ago when the price of energy and food rose. On Monday, the Federal Statistical Office reported that the harmonized consumer price index was 8.7%. The last time German inflation was so high was in the winter of 1973/1974, during the first oil crisis.
It was also well above the 8.0% forecast by analysts in the Reuters poll. Inflation in April was 7.8%. According to official data, energy prices rose 38.3% in May compared to the same month last year, while food prices also rose above average by 11.1%.
Holger Schmieding, chief economist at Berenberg Bank, told Reuters that inflationary pressures on goods hit by supply and food bottlenecks will continue until things improve in the fall.
The data is putting more pressure on the European Central Bank to raise interest rates faster, which is why markets are now looking forward to the next meeting, which is scheduled for June 9th.