“Looking at the main components of inflation in the euro area, food, alcohol and tobacco are expected to have the highest annual rate in October (7.5% compared to 8.8% in September), followed by services (in September (4.6% compared to 4.7% in September), non-energy industrial products (3.5% compared to 4.1% in September), and energy (-11.1% compared to 4.6% in September). Eurostat said.
The agency also said on Tuesday that preliminary figures showed the eurozone economy contracted by 0.1% in the third quarter, below consensus expectations for GDP to be unchanged from the previous quarter.
The ECB expects the eurozone economy to grow by just 0.7% this year, 1% in 2024 and 1.5% in 2025.
Germany, Europe's largest economy, saw its gross domestic product (GDP) fall by 0.1% in the third quarter from the previous quarter, slightly higher than the 0.3% decline expected in a Reuters survey of economists. The economy shrank by 0.8% compared to the same period last year after adjusting for prices.
Both growth and inflation conditions remain very different across the 20-country common currency area. In the third quarter, Latvia recorded the highest quarterly growth rate at 0.6%, followed by Belgium and Spain at 0.5% and 0.3%, respectively. Ireland recorded the highest quarterly decline at 1.8%, followed by Austria at 0.6%.
The eurozone has been plagued by high inflation for the past 18 months, with the consumer price index peaking at 10.6% in October 2022.
The European Central Bank responded with its 10th consecutive rate hike, raising its key interest rate to a record high of 4%, but stopped raising rates last week despite upside risks to energy costs from the unfolding Israeli-Hamas war. I chose that.
The ECB Governing Council reiterated that inflation is expected to remain “too high” for an extended period as domestic price pressures remain strong, but expressed caution given the slowdown in consumer price growth to date. tightened.
“The slowdown is strong and driven by a variety of factors including favorable base effects, slowing wages, subdued inflation pressures and subdued inflation expectations for next year,” Mathieu Sabally, chief European strategist at BCA Research, said in an email on Tuesday. It is supported by.”
“This will provide some reassurance for the ECB, but it is still too early to bet on an imminent rate cut.”
Mark Wall, chief European economist at Deutsche Bank Research, said the ECB would “independently” keep inflation higher than expected on Tuesday.
“Core inflation remains above 4%, twice the inflation target level. The ECB needs to see wage inflation slowing, which could take another six months.” said.
