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Inflation in Europe Dips Negative, First Time Since 2020


BNR – European lawmakers sighed in relief when a primary inflation indicator showed the first price decline since 2020. Factory prices in the 20 Eurozone states declined 1.5% in May compared to the same period in the year before. This is according to information from the European Union’s statistical office.

This is the first-time producer prices have fallen year on year since December 2020.

According to the report, this decline was caused by a 13.3% yearly drop in producer prices in the energy industry.

The figures suggest that consumer price inflation may reduce further, approaching the European Central Bank’s (ECB) 2% objective. Consumer prices in the eurozone climbed 5.5% in June, down from 6.1% in May.

Slow Inflation Rate Offers Respite to Struggling Households

The slow inflation rate is great news for households that have been struggling over the last two years. Consumers have been hit hard by rising living costs, increased mortgages and other debt obligations.

By boosting interest rates, the ECB has attempted to mitigate the impact of price rises. The central bank raised benchmark borrowing charges to 3.5% in June, the highest level in almost 22 years.

Producers, on the other hand, have little to rejoice about. According to June survey results released on Tuesday, eurozone manufacturing production fell by the most since October.

Manufacturers’ prices decreased last month as well, indicating that the official June statistics could point to an additional reduction.

“There is growing evidence that the capital-intensive industrial sector is reacting negatively to the ECB’s interest rate hikes.” According to Cyrus de la Rubia, head economist of Hamburg Commercial Bank.

“Cuts to sales prices for the second month in a row come as no surprise,” he continued. “given the weakness in demand and the rapid rate of cost deflation.”

During the winter, the eurozone economy entered a recession. Furthermore, there have been other signals of deterioration in the April-June timeframe.


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