Euro area annual inflation is expected to rise to 2.5% in March from 1.9% in February, exceeding the European Central Bank (ECB)’s 2% target, driven largely by a sharp rebound in energy prices, according to a flash estimate published by Eurostat this week.
Major euro area economies registered notable increases, with Germany climbing to 2.8% from 2.0%, France to 1.9% from 1.1%, and Spain to 3.3% from 2.5%. The surge was propelled by energy prices, which jumped to 4.9% from 3.1%, according to the statistical office.
The ongoing tensions in the Middle East, now dragging into their fifth week with no end in sight, have halted the downward trend in energy prices and pushed them markedly higher across Europe.
Germany’s energy prices increased by 7.2% year-on-year, marking the first rise since December 2023, data from the Federal Statistical Office (Destatis) showed this week.
The French National Institute of Statistics and Economic Studies said Tuesday that energy prices in the country are projected to rise by 7.3% year-on-year in March, reversing a 2.9% decline in February.
Portugal also saw energy prices climb by 5.8% in March, after a 2.2% drop in February, prompting many Portuguese motorists to cross into Spain for cheaper fuel.
Meanwhile, services inflation in the euro area eased slightly to 3.2% from 3.4%, prices for food, alcohol and tobacco edged down to 2.4% from 2.5%, while the core inflation, excluding energy, food, alcohol and tobacco, fell to 2.3% in March from 2.4% in February.
Although other main inflation categories have yet to show a pronounced effect, ING chief economist Bert Colijn warned that the recent surge in energy prices cannot be viewed in isolation.
He noted that ongoing tensions in the Middle East, which erupted after the US and Israel launched joint strikes against Iran on February 28, pose upside risks not only to energy prices but also to food and goods prices, through fertiliser shortages and supply chain disruptions.
The longer these disruptions persist, he said, the greater the risk that both headline and core inflation will face broader upward pressure.
Xinhua
