Eurozone inflation spikes to highest in over 3 years
by Daily Sabah with Wires
ISTANBULJan 05, 2017 - 12:00 am GMT+3
by Daily Sabah with Wires
Jan 05, 2017 12:00 am
Official figures show that inflation across the 19-country eurozone spiked in December to its highest rate in more than three years, largely on the back of rising energy costs. Eurostat, the European Union's statistics agency, says Wednesday that the annual inflation rate rose to 1.1 percent in December from November's 0.6 percent. December's rate is the highest since Sept. 2013, when inflation also stood at 1.1 percent.
The figures are likely to cheer policymakers at the European Central Bank who have sought to get inflation toward the target of just below 2 percent.
Still, there may be some concern that, when excluding energy costs, inflation remains muted. The core rate, which strips out volatile items like energy and food, rose to only 0.9 percent from the previous month's 0.8 percent.
Energy powers inflation but growth elusive
Inflation kept climbing in major eurozone economies including Germany, France and Spain, revealed official data released on Tuesday as analysts warned that a return to healthy price raises remains far off.
Inflation in Germany, Europe's largest economy, hit its highest level in more than three years in December at 1.7 percent year-on-year, the federal statistics authority, Destatis said. The inflation increase rate was the fastest since July 2013 and beat the 1.5 percent predicted by analysts at Factset.
As measured by the European Central Bank's (ECB) preferred yardstick, the Harmonised Index of Consumer Prices (HICP), German inflation was also at 1.7 percent in December. The German data comes, as releases showed HICP inflation in eurozone partners Spain hitting 1.4 percent and 0.8 percent in France in December, up from 0.5 percent and 0.7 percent in the previous month.
Consumer prices in three of Europe's largest economies appeared to advance towards the European Central Bank's inflation target of just below 2.0 percent after months of stagnation. The central bank has set interest rates at record lows and pumped money into the economy by buying bonds and offering cheap loans to banks as it seeks to support growth and inflation in the 19-nation single currency area.
Analysts, however, have warned that Frankfurt policymakers should stop short of opening any leftover new year's champagne.
Rising energy prices pushed that component of the German consumer prices basket up 2.5 percent year-on-year in December, its first rise in more than three years.
France's Insee statistical agency also pointed to oil prices as a powerful driver of inflation. Energy has grown more expensive after countries belonging to OPEC agreed to cut oil output in December in a bid to drive up prices. A long-lasting supply glut saw the commodity plumb lows of less than $30 per barrel in early 2016, returning to $50-plus territory since the OPEC agreement.
Pricier oil "could easily push German headline inflation through the ECB's 2 percent ceiling," said Jennifer McKeown, an analyst at Capital Economics.
But, it will be longer before core inflation, excluding energy and food prices, in Europe's largest economy reaches such levels.
Meanwhile, "price pressures elsewhere in the eurozone are much weaker," she noted.
"We've avoided the threat of a deflationary spiral, thanks largely to the efforts of the ECB," said Eric Heyer of France's OFCE think-tank, but "we are still far away" from the 2.0 percent target.
"The problem is that we're still in a context of low growth" in France, said Helene Baudchon of BNP Paribas.
While the German government forecast its economy to grow at around 1.7 percent in 2016, the Bank of Spain predicted a 3.2 percent growth, while France's Insee cut its forecast to 1.2 percent in December.
ECB admits Europeans getting poorer
Meanwhile, in a survey conducted in December, the ECB admitted that Europeans were getting poorer and the wealth gap has increased over the last few years. The ECB conducted a comprehensive Household Finance and Consumption Survey, which draws data from 84,000 households in 18-euro currency countries and covers the period from 2010 to 2014.
The survey suggests that fallout from the Great Financial Crisis continued to impoverish most Europeans, and underscores the failure of European governments in increasing or distributing the wealth in a fairer manner.
"At the top of the wealth distribution, the wealthiest 10 percent of households own 51.2 percent of total net wealth; at the bottom, about 5 percent of households have negative net wealth, i.e. the value of their liabilities exceeds the value of their assets," the study says.
Other highlights included of the survey included,
- The median of Europeans' net wealth is 104,100 euros.
The poorest 10th percentile has net wealth of less than one hundredth of the median, just 1,000 euros.
The 90th percentile has 496,000 euros, or five times the median.
The 95th percentile has seven times the median, or 743,900 euros.