Eurozone inflation surged to a fresh all-time high, while the EU’s economy lost momentum — reinforcing fears that a recession is now unavoidable.
Consumer prices jumped by 10.7 percent from a year earlier last month, far exceeding the 10.3 percent median estimate in a Bloomberg survey.
Third-quarter output slowed to 0.2 percent from the previous three months — which was more than analysts estimated, but much less than the 0.8 percent advance recorded between April and June.
Photo: AFP
With the energy crisis continuing to ravage businesses and households, the expansion is expected to shift into reverse during the winter.
European bonds remained lower after the data, with 10-year German yields 4 basis points higher at 2.15 percent. The euro was down 0.3 percent at US$0.9937.
“Recession risks are spreading,” Bank of Spain Governor Pablo Hernandez De Cos told an event yesterday in Turkey.
“Decisive action by us in the current juncture will support medium-term growth, by reducing inflationary pressures and avoiding a de-anchoring of inflation expectations,” he added.
A dramatic third-quarter slowdown was already evident in Spain and France as a post-lockdown boom in the tourism and leisure industries faded.
Those data came a day after the European Central Bank doubled borrowing costs to the highest level in more than a decade, with officials later backing further big moves to wrest prices back toward their 2 percent target.
The latest inflation figures offered scant encouragement. While the headline number continued to be driven by energy and food costs, an underlying gauge that excludes those two elements also ticked up to a record.
Italy on Friday revealed an all-time high that was far more than any economist surveyed by Bloomberg had anticipated.
The outlook remains uncertain. Mild weather and stronger-than-expected supplies of natural gas have led to a significant drop in some wholesale energy costs, but the trajectory of future supply and Russia’s invasion of Ukraine still pose risks.
European Central Bank officials maintain that the priority is to fight inflation.
While acknowledging that a eurozone recession “is becoming more and more likely,” Dutch central bank President Klaas Knot said on Sunday that he would favor a rate hike of 50 or 75 basis points at the final policy meeting of the year next month.
However, other officials show concern about a downturn, some cautioning against pushing rates too high too quickly.
How that debate plays out could determine the scale of the economic contraction facing the region.
“The danger that the deterioration of the economic outlook will turn out to be worse than expected, making an excessively rapid step in the normalization of interest rates disproportionate, shouldn’t be underestimated,” Bank of Italy Governor Ignazio Visco said yesterday.
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