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October 7, 2022

Inflation in Europe still on the rise as food and transportation prices soaring

 Macro commentary by eToro analyst for Romania, Bogdan Maioreanu

 The imminent decrease in inflation that the European Union Central Banks are expecting did not happen yet. Latest reports for August are showing mostly mild increases with some exceptions, or small decreases. The only steep decrease was in Cyprus. The latest inflation data from Romania is showing a monthly increase of 0.6% bringing the annual inflation rate to 15.3%.

For Romania, the main driver for inflation increase was the prices of food that increased in August with 1.82% compared with July 2022. Services prices rose slightly with 0.37% while the prices of non-food goods decreased marginally with close to 0.2%. In food, the largest month on month price increase was in sugar, almost 10% followed by butter, milk and margarine. Some foods that got a little cheaper like corn flour and the fresh fruits.

Fuel was also cheaper with 2.28%. Despite this, the largest price increase of 23.89% was seen in aerial transportation due to increased demand in the vacation period combined with limited availability of seats.

Comparable economies in our neighborhood are not faring better. Despite having the highest interest rates in the European Union, the inflation in Hungary is far from being under control. Annual inflation rate increased to 15.6% in August 2022, the highest level since 1998. Food prices went up 40%, led by margarine, bread, cheese, pasta products and milk products. Compared to the previous month, consumer prices increased 1.8%.

The annual inflation rate in Poland accelerated to 16.1%, the highest in 26 years, and well above forecasts. Contributing to the upward pressure were prices of electricity, gas and other fuels increasing over 40%, the fuels for cars, but also the ones on food and non-alcoholic beverages. On a monthly basis, consumer prices rose 0.8%, well above forecasts, accelerating from the previous month.

Beside the above countries, in Europe, largest increases in inflation were posted by Estonia up 2% and Netherlands up 1.7% both having similar increase drivers in energy and food.

While Spain, Ireland, France, Norway, Iceland, Austria, Portugal and Greece showed mild decreases in inflation, the big surprise is coming from Cyprus with a 2% decrease to 8.90%. Biggest price changes were seen in housing, water, electricity, gas and other fuels and transport.

Bogdan Maioreanu, eToro analyst and markets commentator, has over 20 years of experience in financial services and investments and a strong background in journalism. He held different Corporate Banking management positions in both Raiffeisen Bank and OTP Bank, before moving to business consultancy roles working for IBM Romania among others. Bogdan is an Executive MBA from Asebuss and Washington University.

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