Inflation in Europe has dropped for the first time in more than a year (17 months) as energy prices drifted down from painful highs, but the double-digit rate still hovers near a record that has robbed consumers of their spending power and led economists to predict a recession.
The consumer price index in the 19 countries that use the euro currency hit 10% in November from a year earlier, the European Union statistics agency Eurostat said Wednesday. That was a drop from 10.6% in October, the first decrease since June 2021. The figure reflected prices for food, alcohol and tobacco rising faster, at a pace of 13.6% annually, even as energy prices slipped to a 34.9% rate of increase from an astronomical 41.5% in October.
In Germany, the bloc’s biggest economy, annual inflation slid to 11.3% from 11.6%, while price gains in France held steady at 7.1%, Wednesday’s data showed. Inflation in Italy ticked down to 12.5% from 12.6%, while Spain saw a larger decline, to 6.6% from 7.3%. While energy price inflation fell to roughly 35% year-over-year, compared to nearly 42% in October, prices for food, alcohol and tobacco continued to rise sharply. They leaped by 13.6% in November, versus 13.1% the previous month.
Core inflation, which excludes volatile food and energy prices, held firm at 5%, but the eurozone data supports hopes that inflation in many top economies may have peaked, allowing central banks to dial back aggressive interest rate hikes that are piling pressure on the global economy. Consumer prices in the United States rose by 7.7% in the year to October, the lowest annual reading since January.
Out-of-control inflation is being fed by high energy prices caused by Russia largely cutting off natural gas over the war in Ukraine as well as bottlenecks in supplies of raw materials and parts and rebounding demand after COVID-19 pandemic restrictions ended.
While rising prices have hit economies worldwide, they have taken a particularly high toll in Europe because of its dependence on Russian natural gas, which exporter Gazprom has reduced to a trickle. European leaders say it’s energy warfare due to their support for Ukraine.
However, natural gas prices have fallen from all-time highs this summer as Europe has largely filled its storage for winter with supplies from other countries and mild weather has reduced fears of a shortage during the heating season.