Inflation in the European countries using the euro currency has broken into double digits as prices for electricity and natural gas soar, signalling a looming winter recession for one of the globe’s major economies as higher prices undermine consumers’ spending power.
Consumer prices in the 19-country eurozone hit a record 10 per cent in September, up from 9.1 per cent in August, EU statistics agency Eurostat reported on Friday.
Only a year ago inflation was as low as 3.4 per cent.
Price increases are at their highest level since record-keeping for the euro started in 1997.
Energy prices were the main culprit, rising 40.8 per cent over a year ago. Food, alcohol and tobacco jumped 11.8 per cent.
Inflation has been fuelled by steady cutbacks in supplies of natural gas from Russia and by bottlenecks in getting supplies of raw materials and parts as the global economy bounces back from the COVID-19 pandemic.
The Russian cutbacks have sent gas prices soaring to the point where energy-intensive businesses such as fertilizer and steel say they can no longer make some products at a profit.
Meanwhile, high prices for utility bills, food and fuel are leaving consumers with less money to spend on other things. That is the main reason economists are predicting a recession, or a serious and long-lasting downturn in economic activity, for the end of this year and the first months of next year.
The European Central Bank is raising interest rates to combat inflation by keeping higher prices from being baked into people’s expectations for wages and prices, but can’t by itself lower energy prices.
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