Inflation in Europe accelerates, while in Italy it stops below expectations. According to preliminary December data released by Eurostat and Istat, prices in the euro area rose by 2.4% (compared to 2.2% in November) and in Italy by 1.3% (compared to 1.6 % expected), with consumer prices growing on average by 1% in 2024 against +5.7% in 2023. So? The European rise could slow down the ECB. The anticipated 50-point maxi rate cut could be postponed at the next meeting in Frankfurt and slow down the change of pace hoped for by many economists who, interviewed by the Financial Times, criticized Lagarde & Co for a “too slow” policy of cuts.
According to Eurostat’s flash estimate, inflation in December in the Eurozone reached 2.4%, driven by the services component, which marks an increase of 4% (from 3.9% in November). This is followed by food, alcohol and tobacco products with an increase of 2.7%, non-energy industrial goods (+0.5%) and energy, which shows a modest increase of 0.1%. An acceleration compared to November and the last months of 2024.
In Italy, preliminary data from Istat show a picture below expectations. The national consumer price index for the entire community (including tobacco) stood at +0.1% on the month in December and +1.3% on the year, stable compared to November. The harmonized index of consumer prices recorded an annual increase of 1.4%, down from 1.5% in November. Core inflation, net of energy and fresh food goods, fell compared to the previous month, stopping at 1.8. The prices of unprocessed food (+2.5% compared to +3.8% in November) and durable goods (-1.9%) are slowing down, while regulated energy prices are rising (+11.9%). What caused that slight +0.1% were the increases in transport-related services (+1.4%) and regulated energy services (+0.8%). Better in December the shopping cart. The prices of food, household and personal care goods grew by 1.9% on an annual basis, compared to +2.3% in November.
Looking to 2024, the year ends for Italy with an average price growth of 1.0%, very far from+5.7% in 2023. Reason? The sharp decline in energy prices (-10.1% in 2024 from +1.2% in 2023) and the slowdown in food prices (+2.3% in 2024 from +9.8% in 2023).
The data on Italian unemployment has also arrived which, in November, marks the lowest level since the beginning of the historical series in 2004. The rate in fact drops to 5.7%, even if the youth rate marks an increase to 19.2%. On a monthly basis, the number of employed decreases slightly (-13 thousand) and the employment rate remains stable at 62.4%. At the same time, the inactivity rate rises to 33.7% (+23 thousand inactive especially among men and under 35s).
What impact will growing inflation in Europe have on the ECB’s next monetary policy decision, expected on January 30? In 2024, the institution led by Christine Lagarde adopted a gradual approach, cutting interest rates four times to 3%, but faced criticism for the slowness of its action, compared to that of the Federal Reserve. The slight rise in inflation in the Eurozone in December could push Frankfurt to once again confirm its caution in future rate cuts.
