UK inflation slows to lowest rate in over a year, Eurozone prices also down
ALBAWABA – Official data from the Eurozone and the United Kingdom (UK) indicate that Eurozone and UK inflation have both been slowing in October as the Eurozone economy contracted further, news agencies reported Tuesday.
The British Retail Consortium said Tuesday that shop prices were 5.2 percent higher in October than a year earlier, down from 6.2 percent in September, Bloomberg reported.
This is the fifth month in a row that UK inflation in stores has fallen, with the rate at its lowest since August 2022.
Meanwhile, in the Eurozone, prices rose by 2.9 percent in October, marking the slowest pace of inflation since July 2021, a Eurostat flash reading showed, as reported by Reuters Tuesday.
Consumer price inflation decelerated from 4.3 percent in September to well below the median estimate of 3.1 percent forecast by analysts in a Bloomberg survey. But the fall from double-digit inflation figures just a year ago came at a cost.
ECB, BOE face difficult choices to bring Eurozone, UK inflation to target
The Eurozone economy shrank by 0.1 percent in the three months to September, according to a separate Eurostat release, and is flirting with a recession.
Notably, the European Central Bank (ECB) has voiced concerns about Eurozone inflation getting stuck below its 2 percent target.
Central banks around the world are cautious about running inflation below their targets, as it would negatively impact economic growth.
UK inflation slows to lowest rate in over a year, Eurozone prices also down - Shutterstock
Tuesday’s data show that while the ECB’s 10 back-to-back rate hikes are in fact helping to bring inflation back toward the 2 percent goal, they’re also taking a toll on households and firms, sending loan costs through the roof.
Europe’s biggest weak spot is also its largest economy, Germany, according to Bloomberg.
Reports on Monday showed Germany’s output shrank by 0.1 percent in the third quarter, while the country’s GDP has barely risen for a year, with a recession looming around the bend.
Italy just reportedly dodged a recession, while France and Spain grew in the three months through September, Bloomberg reported.
Bringing Eurozone, UK inflation down to target at the expense of the economy
Overall, while elevated borrowing costs should send price gains back to target in 2025, a measure of core pressures that excludes food and energy is retreating less rapidly. It moderated to 4.2 percent in October from 4.5 percent the previous month, but it is not clear as to whether it will hit its target by 2025.
Headline inflation started falling sharply in September as the massive increase in energy prices recorded a year earlier set a higher “base” for the annual comparison - an effect set to fade or even reverse in upcoming readings, according to Reuters.
However, a measure of inflation that excludes energy, food, alcohol and tobacco recorded a more moderate decline, to 4.2 percent, the lowest level since July 2022, from 4.5 percent.
As for UK inflation, food price increases decelerated for the sixth month in a row to 8.8 percent in October, according to the BRC data — the lowest rate since July last year. Prices of domestically produced foods as well as children’s clothing fell, compared with a month earlier.
On Thursday, the Bank of England will decide whether to hike rates above 5.25 percent, with the economy suffering from tepid growth combined with lingering price pressures.
