Unprecedented Spike: Euro Area Inflation Skyrockets to 7%!

Eurozone Inflation Continues to Rise, Driven by Soaring Food Prices, Despite ECB Rate Hikes: Stats Agency

Eurozone Inflation Rises Marginally in April

Preliminary estimates show that Eurozone inflation rose marginally in April to 7%, driven largely by a surge in food prices which have grown by 2.75% in the last month. Despite seven rate hikes by the ECB targeting rising prices, Eurozone inflation remains sticky.

However, annual inflation remains down year-on-year, falling from 7.4% to 7% in April 2023. Excluding volatile items such as food and energy, core inflation remains higher at 7.3%, despite a marginal month-on-month decline of 0.2%. An even slimmer measurement of inflation, excluding alcohol and tobacco, decreased from 5.7% to 5.6% month-on-month.

Service inflation, including labor costs, increased from 5.1% to 5.2% in April, suggesting growth in nominal wages to combat rising prices.

Ireland’s Inflation Figure Remains Significantly Lower

At 6.3% in April, Ireland’s inflation figure remains significantly lower than the Eurozone and EU averages, which have been inflated by larger countries like Germany and Italy, where consumer prices have risen to 7.6% and 8.7%, respectively. On the other end of the spectrum, Luxembourg recorded an inflation figure of just 2.7%, followed by Belgium at 3.3%.

Disparity in Irish Inflation Figures

There remains some disparity, however, in Ireland’s inflation figure, with a divergence appearing between figures reported by Eurostat and those recorded by the Central Statistics Office. At 6.3% according to Eurostat, the CSO has measured Irish inflation to be considerably higher, reaching 7.2% in April 2023 – almost a full percentage higher than the European agency.

Addressing the disparity, the CSO said the divergence had become particularly noticeable in the last few months and is due to some items having different weights in the respective indices. Speaking to the Irish Examiner, a spokesperson for the CSO said mortgage interest rates, which have soared in the last year, have been the main driver of this disparity, with CSO figures including mortgage prices while Eurostat does not.

In conclusion, while Eurozone inflation has risen marginally in April, annual inflation remains down year-on-year. Ireland’s inflation figure remains significantly lower than the Eurozone and EU averages, but there is a disparity in the figures reported by Eurostat and the Central Statistics Office, with mortgage interest rates being the main driver of this difference.

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