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HomeEconomyInflation in the eurozone falls back to single digits as downward trend...

Inflation in the eurozone falls back to single digits as downward trend continues

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Annual inflation across the eurozone fell back to the single-digit territory and stood at 9.2% at the end of December, according to a flash estimate released by Eurostat on Friday morning.

Inflation started easing in November but still stood at 10.1%.

It comes as gas prices, one of the main drivers behind last year’s record-breaking inflation, returned to pre-war levels amid unusually warm weather.

Although the news can be seen as a positive development, the eurozone’s inflation rate represents almost five times the 2% target set by the European Central Bank (ECB).

The bank has in recent months raised interest rates at an aggressive pace to make spending more expensive and tame surging prices.

“We stand ready to adjust all of our instruments within our mandate to ensure that inflation returns to our medium-term inflation target,” ECB President Christine Lagarde said last month.

Still, the majority of member states that use the euro as currency saw inflation decrease over the past month, with a marked drop in Germany, from 11.3% in November to 9.6% in December.

Spain (5.6%), Luxembourg (6.2%) and France (6.7%) recorded the lowest inflation rates across the bloc, while Latvia (20.7%), Lithuania (20%) and Estonia (17.5%) again saw the highest levels.

Energy inflation receded sharply, from 34.9% in November to 25.7% in December, while fresh food saw a more moderate contraction, from 13.8% to 12.% over the last month.

However, core inflation, which excludes the volatile prices of energy, food and tobacco and therefore gives a more accurate picture of the health of the economy, went slightly up, from 5% in November to 5.2% in December.

In total, nine out of the 19 eurozone members remain in double-digit territory.

Croatia, which adopted the euro at the start of 2023, was not included in the computation.

The latest numbers from Eurostat herald a “changing trend in inflation” towards a continued decline, said Zsolt Darvas, a senior fellow at Bruegel, a Brussels-based economic think tank.

“The main reasons for that are: first, energy prices are now falling, implying that the costs of companies and also department stores are going down. So there is no price pressure from their side to raise prices,” Darvas told Euronews in a video interview. 

“Secondly, wages increased much less than inflation, implying that consumers have a reduced purchasing power and they do consume fewer goods and services. This will depress demand throughout the eurozone and the European economy, and that will also have a downward impact and negative impact on inflation.”

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