Eurozone inflation rebounds more than expected in October

Eurozone inflation rose more than expected to reach 2.0 percent in October – Copyright AFP Mladen ANTONOV

The eurozone’s annual inflation rate rebounded more than expected in October due to rising food costs, official data showed on Thursday, but remains in line with the European Central Bank’s two-percent target.

Year-on-year consumer price increases in the 20-country single currency area reached 2.0 percent in October, rising from 1.7 percent in September, the EU’s official data agency said.

The September rate had been the first time the figure fell below the ECB’s two-percent target in more than three years.

Inflation accelerated more than expected by analysts surveyed by FactSet and Bloomberg, who predicted it would increase to 1.9 percent in October.

But core inflation, which strips out volatile energy, food, alcohol and tobacco prices and is a key indicator for the bank, remained stable at 2.7 percent in October, Eurostat said.

The core inflation figure was higher than expected by analysts who predicted it would fall to 2.6 percent this month from 2.7 percent in September.

Food and drink price rises reached 2.9 percent in October, well above the 2.4 percent increase registered in September.

Meanwhile energy prices fell at a slower rate of 4.6 percent, compared with a 6.1 percent drop a month earlier.

With inflation cooling since its 10.6 percent peak in October 2022, the ECB has begun cutting interest rates this year as it focuses on tackling Europe’s sluggish growth.

Despite inflation coming in higher, the Frankfurt-based body will likely cut rates again in December, although it could opt to reduce borrowing costs at a slower rate.

Official data on Wednesday showed the single currency area grew by 0.4 percent between July and September this year, a greater-than-expected figure, but still paltry compared to the United States during the same period.

The United States on Wednesday reported growth of 0.7 percent in the third quarter.

– German inflation’s sharp rise –

Services inflation in the eurozone, which had been accelerating in recent months, also remained stable at 3.9 percent in October, the data showed.

Inflation in the eurozone’s biggest economy, Germany, rose sharply in October to reach 2.4 percent from 1.8 percent in October on the back of higher food prices.

In France meanwhile, consumer price rises ticked up slightly to 1.5 percent this month, from 1.4 percent in September.

Slovenia recorded a zero percent inflation rate in October, according to Eurostat.

Other Eurostat data published on Thursday showed the unemployment rate in the single currency area remained stable at 6.3 percent in September.