Eurozone inflation soars to new record high

INFLATION in the eurozone has soared to a new record high, piling more pressure on the European Central Bank as price rises show no signs of slowing.

Consumer prices rose 0.7pc in July, leaving them 8.9pc higher than a year before, according to Eurostat.

Energy costs are the biggest driver of inflation, up 39.7pc in a year, but food and services prices also continued to pick up.

Maartje Wijffelaars, of Rabobank, said the figures “are likely to give consumers and the ECB even bigger headaches”.

“Going forward, the path for inflation is very dependent on what happens with Russian gas flows, and hence energy prices, but in any case it isn’t expected to come down fast,” she added.

Soaring prices and the energy crisis are having a disastrous effect on Europe’s biggest economy. German growth ground to a halt in the second quarter, new figures showed, with GDP flatlining between April and June.

The grim reading contrasted against strength elsewhere, with France, Spain and Italy all reporting solid growth that beat forecasts.

France’s economy grew 0.5pc in three months, while Italy expanded 1pc and Spain 1.1pc. France and Spain, which provided full breakdowns of their figures, were spurred by a rebound in tourism.

Overall, the eurozone registered 0.7pc quarterly growth, far stronger than the 0.2pc expected by economists.

Andrew Kenningham, of Capital Economics, said the “chunky increase” was driven by the reopening of the services sector from lockdowns, which had “masked a deterioration in most other parts of the economy”.

“We expect a triple whammy of high inflation, tighter monetary conditions and an energy crisis to push the economy into recession later this year,” he added.

Last week, the ECB increased its base interest rate by 0.5 percentage points, the first increase in 11 years.

‘We expect a triple whammy of high inflation, tighter monetary conditions and an energy crisis’