Saturday 24 June 2017

Energy, alcohol, tobacco and food see Eurozone inflation hit three-year high

December’s rate was the highest since September 2013
December’s rate was the highest since September 2013
Colm Kelpie

Colm Kelpie

Inflation in the Eurozone surged to its highest level in more than three years last month, driven by a rise in prices for energy, alcohol, tobacco and food.

Annual inflation last month rose to 1.1pc from 0.6pc in November, according to the official statistics agency Eurostat.

But core inflation, which strips out energy, inched up to 0.9pc from 0.8pc.

The 1.1pc rate was the highest since September of 2013. Higher prices will not be welcomed by consumers, but the figure brings the bloc's inflation rate nearer to the official European Central Bank target of close to 2pc.

Energy was expected to have the highest annual rate in December at 2.5pc, compared with -1.1pc in November, followed by services at 1.2pc, compared with 1.1pc in November. Meanwhile, the end of last year saw the Eurozone economy maintain a "robust pace of expansion", according to the Eurozone composite output index from the financial information firm Markit.

Manufacturing led the growth acceleration, with production increasing at the quickest rate since April 2014.

The service sector also rose solidly, with the rate of increase staying close to November's 11-month high.

Economic expansions were also signalled across the 'big four' nations of Germany, France, Italy and Spain.

The pace of increase in France surged to a one-and-a-half-year record, but remained below the Eurozone average.

Separately, global bank HSBC yesterday raised its forecast for global growth and inflation over the next two years based on strong manufacturing activity, a resilient China and the fiscal boost expected to come in the United States.

It was the first time in nearly five years it had upped its growth and inflation outlooks over a two-year horizon as 2017 gets under way and as investors prepare for US President-elect Donald Trump entering the White House.

The bank now sees the global economy expanding at a 2.5pc pace this year compared with its 2.3pc forecast in September.

"All of the above help explain why we can offer a rare treat: for the first time since early 2012, we are increasing our forecasts for both global growth and inflation for the next two years," the bank's team of economists said in a note.

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