Annual inflation rates in the EU and euro area continue to show signs of moderation, with January figures showing inflation rates falling in 15 of the EU member states. However, the remaining 11 countries recorded increases.
advertisementEU inflation has fallen gradually and consistently since its peak of 11.5% in October 2022. The EU's annual inflation rate was 3.1% in January 2024, down from 3.4% in December, according to EU statistics agency Eurostat. .
This was in contrast to 10.0% during the same period last year.
At the same time, the annual inflation rate in the eurozone region was 2.8% in January 2024, down from 2.9% in December and significantly lower than 8.6% in January 2023.
prices are rising slowly
The decline in inflation means that consumer prices are still rising, but more slowly than before. Negative inflation, or deflation, occurs when prices fall in an economy. For example, EU energy prices fell in January compared to the same month last year.
Eurostat's preliminary estimates released on March 1 showed that annual inflation in the eurozone region fell to 2.6% in February from 2.8% in January. However, it remains above the European Central Bank's (ECB) target inflation rate of 2%.
Inflation rates, as measured by the Harmonized Index of Consumer Prices (HICP), vary widely across Europe. Although most EU member states are experiencing economic slowdown, no country had a negative year-on-year inflation rate in January. Eurostat's February estimates still show no signs of such a decline in any country.
How do EU inflation rates compare and how has annual inflation changed since its peak?
The inflation rate reached its highest level in 40 years in October 2022.
As the Organization for Economic Cooperation and Development (OECD)'s 2023 report showed, consumer prices rose significantly after the COVID-19 crisis. Prices began to rise in 2021 due to the rapid recovery from the pandemic and related supply chain bottlenecks.
Russia's invasion of Ukraine also caused inflation to rise again due to its impact on energy prices, rising to levels not seen in 40 years in October 2022.
From 1997 to the end of 2021, the highest annual inflation rate in the EU was 4.4%, recorded in July 2008.
Since that peak, annual inflation rates for both the EU and the euro area have declined every month except for one month in each section.
Romania has the highest inflation rate
According to January 2024 figures, annual inflation rates in the EU ranged from 0.9% to 7.3%. Romania had the highest rate among EU member states at 7.3%, followed by Estonia (5%), Croatia (4.8%) and Poland (4.5%).
Denmark and Italy have the lowest inflation rates
Denmark and Italy had the lowest annual inflation rates at 0.9%. Latvia, Lithuania and Finland followed with 1.1%.
Among the other big four EU countries, Spain (3.5%) and France (3.4%) reported inflation rates above the EU average, while Germany (3.1%) reported the same level as the EU. The UK inflation rate was 4.2%.
Compared to December, annual inflation fell in 15 EU countries, remained stable in one, and rose in 11 others.
Candidate countries have high inflation rates
All five candidate countries for which Eurostat provided data revealed higher annual inflation rates than the EU.
Turkey was a severe outlier at 64.9%. Indeed, opposition parties and the former head of the Turkish Statistical Institute claim that official inflation statistics are manipulated. According to the Independent Inflation Research Group (ENAG), the annual consumer inflation rate was found to be 129%.
A decline is expected in 11 out of 20 countries in February.
Annual inflation is expected to be lower in February than in January in 11 of the 20 eurozone countries, according to Eurostat's preliminary estimates.
advertisementSlovakia saw the biggest decline of 0.7 points (pp) from 4.4% to 3.7%, followed by Spain, Malta and Estonia, all with 0.6 points.
According to estimates, it rose in four countries: Belgium (2.1 points), Luxembourg (0.2 points), Cyprus and Finland (all 0.1 points).
In the euro area, Croatia had the highest annual inflation rate as measured by HICP at 4.8% in February 2024, while Latvia had the lowest at 0.9%.
Looking at the main components of the euro area, inflation, food, alcohol and tobacco are expected to have the highest annual rate in February (4.0% compared to 5.6% in January). This is followed by services (3.9%, 4.0% in January) and non-energy industrial products (1.6%, 2.0% in January).
According to this estimate, energy inflation will remain at -3.7%, a notable decline compared to January's -6.1%.
advertisementRaw food inflation was 6.9% in January, but fell to 2.2% in February. This may be particularly good news for low-income households, as real food inflation, which is food inflation minus overall inflation, puts significant pressure on low-income households.
Eurozone food and non-alcoholic beverage inflation was 5.4%, resulting in eurozone real food inflation of 2.8% in January.
Economic activity will accelerate in 2024
Economic activity within the EU is expected to gradually accelerate in 2024, and consumer spending is also expected to increase, according to the European Commission's 2024 Winter Economic Forecast Report published in mid-February. . As inflation continues to fall, real wages increase. Lower inflation rates will help limit food price increases.
