The inflation rate in the Eurozone accelerated for the first time since September at the end of last year. According to a preliminary estimate released by the statistical office Eurostat in Luxembourg on Friday, consumer prices in December were 2.9% higher than a year ago. In November, the inflation rate was significantly lower, reaching its lowest level since the summer of 2021 at 2.4%. Analysts had anticipated a significant increase in inflation in December and warn of further increases.
In a month-on-month comparison, prices rose by 0.2%, according to the statement. Until the increase in December, inflation in the Eurozone had tended to weaken throughout 2023, after reaching a record high of 10.7% in the fall of 2022.
It had previously been reported that inflation had also increased in France and Germany in December, the two largest economies in the Eurozone. Special effects played an important role in Germany. With this development, the price development moved further away from the inflation target of the European Central Bank (ECB), which aims for an inflation rate of 2.0% in the euro area in the medium term.
However, core inflation, which excludes volatile prices for energy and food, continues to decline. Eurostat reported a decrease in the annual rate to 3.4%, down from 3.6% in November. According to many economists, core inflation reflects the fundamental increase in prices and therefore better represents the inflation trend than the overall rate.
While food and non-alcoholic beverages were still significantly more expensive in December than a year ago, the price increase slowed to 6.1% from 6.9% in November. However, the decline in energy prices has slowed significantly. They fell by only 6.7% year-on-year, compared to 11.5% in November.
"The higher inflation rate in December is mainly due to the price development of energy," commented analyst Christoph Weil from Commerzbank. The weaker price decline in this area has "increased the inflation rate by 0.7 percentage points on its own."
There are still significant differences in inflation rates within the currency area. They range from 0.5% in Belgium to 6.6% in Slovakia. In Germany, inflation calculated according to European standards is 3.8%. According to national calculations, it is 3.7%.
Until last September, the ECB had raised interest rates in the fight against high inflation and has not changed them since. The first interest rate cuts are expected in the market next year. According to Commerzbank expert Weil, it is still "too early to proclaim victory over inflation". The European Central Bank is likely to lower its interest rates only hesitantly.