Eurozone inflation hits 2% for the first time since 2018 Business

Inflation in the euro area reached its highest level in more than two years after economies in the region began to lift coronavirus restrictions and rebound in demand deepened bottlenecks in the ‘offer.

Consumer prices rose 2% per year in May, more than economists had predicted, with energy rising the most compared to a year ago, when the region was in full lockdown. Germany, Spain and Italy – three of the eurozone’s four largest economies – all reported increases.

Europe is starting to turn the page on the pandemic. Falling infection rates are allowing shops, restaurants and cultural venues to reopen, and travel is gradually resuming. At the same time, manufacturing – which has held up well in the last round of restrictions – increasingly faces supply chain disruptions.

Delays in the delivery of raw materials and components are limiting production growth, preventing companies from meeting growing demand, according to an IHS Markit survey.

While purchasing activity has grown at the fastest pace in nearly a quarter of a century of data, manufacturers have also reduced inventories of finished goods to the highest degree recorded since November 2009. Factories have increased their prices the most and over 18 years of survey data because they took advantage of the tight market to pass the higher costs on to customers.

ECB says rise in inflation is temporary

The European Central Bank has underlined that the price increases are likely to be transitory and that it is still too early to speak of loosening monetary support. While inflation is now at the level that policymakers aim to achieve in the medium term, much of the rise can be explained by temporary factors or by energy.

The institution presents updated economic projections on June 10. Core inflation, a less volatile measure that excludes volatile items such as food or fuel, was only 0.9% in May.

The OECD made a similar argument this week, saying that inflation will accelerate in the coming months, spurred by higher operating costs and reduced competition from bankruptcies, but those pressures are expected to grow. fade by the end of the year.

Still, he sees longer-term “upside risks” as the recovery continues. The labor market has already started to show signs of improvement. Unemployment in the euro area unexpectedly fell to 8% in April, Eurostat said. At the same time, German companies have made less use of the leave program that has helped millions of workers keep their jobs during the pandemic. Unemployment in the country continued to fall in May, according to another report.