Eurozone crisis deepens as inflation soars to a record high of 10.7% and economy slows sharply
- Inflation was in double digits in 11 of the 19 nations of the single currency zone
- In Germany, consumer price inflation hit 11.6%, in France 7.1% and in Italy 12.8%
- Eurozone GDP grew by 0.2% in the third quarter, having expanded 0.8% in Q2
The crisis in the eurozone deepened as inflation hit a record high and the economy slowed sharply.
Official figures showed inflation raced to 10.7 per cent last month – far worse than expected and up from 9.9 per cent in September.
In another blow, separate figures showed the eurozone economy grew by just 0.2 per cent in the third quarter, having expanded by 0.8 per cent in the previous three months.
Eurozone inflation: Energy prices were the biggest factor in the increase, surging by 41.9%
The double whammy underlined the scale of the task facing the European Central Bank (ECB) as it raises interest rates to bring inflation back under control without tipping the economy into recession.
Inflation was in double digits in 11 of the 19 nations of the single currency zone, according to the data from official statistics agency Eurostat.
Energy prices were the biggest factor in the headline increase, surging by 41.9 per cent as Vladimir Putin continues to choke off gas supplies to western Europe.
The price squeeze is putting the brakes on economic growth and experts fear that the economy will contract and go into recession in the coming months.
Yet with GDP still just about ticking over some think there is leeway to unleash further sharp interest rate hikes as the ECB focuses on slaying inflation.
Last week, the ECB hiked rates by 0.75 percentage points to the highest level since 2009.
It has lifted rates by a total of two percentage points over the past three months and indicated that further hikes could come as soon as December.
The price squeeze is putting the brakes on economic growth in the eurozone
Andrew Kenningham, chief Europe economist at Capital Economics, said: ‘The increase in eurozone GDP in the third quarter does not alter our view that the eurozone is on the cusp of a recession. But with inflation having jumped to well over 10pc, the ECB will prioritise price stability and press on with rate hikes regardless.’
Commerzbank senior economist Christoph Weil said: ‘The ECB’s goal of pushing the inflation rate back to just under 2 per cent on a sustainable basis seems a long way off.’
The ECB is battling the biggest price spiral since eurozone records began in 1997.
Yesterday’s data showed that it was not only soaring gas and electricity prices causing rampant inflation, with food, alcohol and tobacco up by 13.1 per cent.
Even stripping out those volatile factors, a ‘core’ measure of inflation has continued to creep up, hitting 5 per cent.
In Germany, consumer price inflation hit 11.6 per cent, in France 7.1 per cent and in Italy 12.8 per cent. Price rises are a worry globally but more pronounced in Europe.