The skyrocketing cost of energy contributed significantly to eurozone inflation reaching a new all-time high of 8.6 % in the month of June.
The record-breaking figure, which is up from 8.1 percent in May, spells bad news for the European economy, which is currently dealing with several challenges all at the same time: the war in Ukraine, dwindling supplies of Russian gas, global food insecurity, disrupted supply chains, and the ripple effects from stringent lockdowns in China. The record-breaking figure, which is up from 8.1 % in May, spells bad news for the European economy.
Energy continues to be the primary driver of pricey costs, with a price increase of 41,9 % on an annual basis. This is due to the fact that EU countries are rushing to replace inexpensive Russian fossil fuels with alternative suppliers who charge higher rates.
Because of the high cost of gas, unprocessed foods such as vegetables and fruit are also facing a significant price hike of 11.1%. This is because fertilizers are becoming more expensive for farmers and producers.
No member state of the EU is immune to the wrath of inflation, which is reaching levels that have never been seen before in the entire existence of the single currency. The problem has evolved into a very time-sensitive and complex challenge for politicians, businesses, and individual customers.
Due to their substantial reliance on foreign imports to meet their energy demands, the Baltic nations continue to be disproportionately hit by the increasing trend in costs. Estonia (22 %), Lithuania (20.5 %), and Latvia (19 %) are the countries most negatively impacted by this trend.
While Germany recorded a tiny decline in June (8.2 percent) compared to May, Spain became the first major member state to achieve double-digit inflation, with a figure of 10 percent (8.7 percent ).
Malta (6.1 %) and France (6.5 %) continue to lead the pack in terms of having the lowest inflation rates within the eurozone. The majority of France’s electricity comes from nuclear power, which protects the nation from the unpredictable nature of the gas market.
The most recent inflation figure from Eurostat was released a few weeks after the European Central Bank (ECB) announced that it would be increasing interest rates for the first time in more than a decade in an effort to bring prices down.
According to Christine Lagarde, the President of the European Central Bank (ECB), her organization would continue to hike interest rates if the inflation situation gets worse, which the data from June looks to corroborate.
The European Central Bank has set an annual target of 2 % inflation, but the rate recorded this month was more than four times that target.