Eurozone inflation rises for third month as energy costs edge up

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The year-on-year eurozone inflation figure for December has confirmed preliminary estimates coming in at 2.4%, according to Eurostat. That was the third consecutive month of growth and, in contrast with November’s 2.2%, the highest figure since July. 

December’s figure was mainly because of base effects, as annual rates are no longer factoring in the fall in energy prices seen last year. 

Energy costs inched up 0.1% in December, up from -2% in the previous month, making it the first positive figure since July. Services inflation also edged up to 4% in December, up from 3.9% in November. 

On the other hand, alcohol, food and tobacco inflation dropped marginally, as rising prices for processed food, as well as tobacco and alcohol, was offset slightly by the falling prices of non-processed foods. 

German inflation rose to 2.8% in December, up from 2.4% in November, while French inflation inched up to 1.8%, from 1.7% in the previous month. Italian inflation dropped to 1.4% in December, down from 1.5% on the previous month. 

The Eurozone annual core inflation rate came up to 2.7% in December, which was the same as the previous three months, while also being in line with analyst estimates. Core inflation excludes alcohol, tobacco, food and energy prices, because of their volatility.

Why has German and French inflation been on the rise?

German inflation has mainly been increasing because of higher food and services prices. In addition, energy prices have been slower to come down, making inflation worse.

France has been hit by many of the same economic factors as Germany, with rising electricity tariffs also contributing to the problem. Ongoing supply chain issues and sluggish consumer and business confidence have made market conditions more difficult.

Italy’s drop in inflation is mainly due to a fall in industrial goods’ and services prices.