– Annual inflation in the eurozone fell from 10.6 percent in October to 10 percent in November, thanks to lower energy prices, according to a preliminary estimate published Wednesday by Eurostat.
This is mainly due to the decline in energy prices, Eurostat said. The year-on-year increase in energy prices is estimated at 34.9 percent in November, compared with 41.5 percent in October.
Annual inflation for non-energy industrial goods should remain stable at 6.1 percent, while the price of services should ease a bit, from 4.3 percent last month to 4.2 percent in November.
However, the prices of food, alcohol and tobacco continue to increase annually, going from 13.1 percent in October to 13.6 percent in November.
“There was good news ahead of us,” said Bert Colijn, senior eurozone economist at ING. “Eurozone inflation rate eased after some nasty surprises on the upside.”
However, caution should be exercised, warns Colijn.
“Whether this is the peak of inflation remains to be seen. Another bout of the energy crisis could easily send inflation back up and core inflation usually turns out to be stagnant after a supply shock,” he said.
European Central Bank (ECB) President Christine Lagarde said on Monday: “We don’t see the components or the direction that would lead me to believe that we have reached the peak of inflation and that it is going to come down in no time.”
On the other hand, “government subsidies that offset the negative effects of higher energy prices on households and consumers actually spread inflationary pressures,” Carsten Brzeski, Global Head of Macro at ING, warned earlier this month.
He said the energy crisis should also last until the winter of 2023-2024 and this will put pressure on natural gas demand as European countries will need to fill up their gas storage. ■