Julia Shvytkina
14 September 2022 16: 45
Headings: World News Economy

Prices are rising, belts are tightening tighter: inflation in Europe and not only beats another anti-records

Financial reports for August confirmed the pessimistic forecasts of economists, and not only for Europe and the UK, but also for the US.

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Prices are rising, belts are tightening tighter: inflation in Europe and not only beats another anti-records

Inflation in Eurozone countries breaks new anti-records every month. Thus, annual inflation in the EU, according to preliminary estimates by Eurostat, accelerated and broke a new record, amounting to 9,1% at the end of August. Moreover, economists "broke the ties", warning that the current catastrophic situation - far from the limit. Thus, an expert at the Institute for Economic Research WIFO Joseph Baumgartner predicts peak inflation weight in 2022-2023 Years.

"We need to make sure inflation stays high for a long time", — said Baumgartner, adding that as high as "now or next year", it will not remain, however, in 2024-2025, its indicators "will be quite far from the ECB's target of 2%."

Moreover, the greatest damage from energy crisiscaused by war in Ukraine, and its effects, has been dealt the German economy, until recently considered practically inflexible.

Rising prices continue, and state support has ended

In August this year cost of living in Germany has risen on an annual basis, on average 7,9% about it says in today's report from the Federal Statistical Office. In July, prices in Germany rose by 7,5%.

The message notes that the main reason for high inflation rising energy and food prices remain in the country, while government measures to support the population, introduced from June to August, have already expired. With the abolition of the state surcharge for fuel again prices for gasoline and diesel have risen. At gas stations in Germany, their prices are again higher than in all neighboring EU countries.

Energy carriers in Germany in August rose in price on an annualized basis by 35,6%. Particularly sharp on 46,4% - increased energy prices for households. The cost of fuel oil for heating has more than doubled over the year (+ 111,5%), natural gas - on 83,8%, and electricity - on 16,6%. The upward trend in prices has been maintained for the sixth month in a row.

Foodstuffs in Germany, prices have also been continuously rising for the sixth month. The increase in prices averaged 16,6%. Prices for vegetable and butter rose especially noticeably (+ 44,5 %), dairy products and eggs (+ 26,8 %). Meat and meat products have risen in price by 18,6%, and bread - on 17,1 %.

Minister of Economy of Germany Robert Habek said today on the TV channel Worldthat if the rise in prices in the country continues, then there is a risk of a recession already in 2023 year.

"If price increases and inflation continue unchecked, as we have seen, then there is a risk of a recession next year," - he said.

According to the minister, as long as it is preventable, but it will be quite difficult to do this.
"We can prevent this. It will be difficult and not easy. But a recession is not the law of nature. We must develop a set of measures, we must reduce energy prices, strengthen demand", says Khabek.

The situation is no better in the United Kingdom.

In August UK consumer prices jumped up on 9,9% in annual terms, show ONS data - National Statistical Office of the country.

The report notes that the indicator is at the highest level in more than 40 years.

Rising inflationary pressure in UK predominantly associated with higher prices for utilities and food. However, inflation slowed somewhat due to lower rates fuel price increases, noted in the ONS.

Prices excluding food, alcohol, tobacco and energy increased by 6,3% in annual terms and 0,8% relative to the previous month.

Retail prices skyrocketed 12,3% in annual terms, the same as a month earlier.

Due to the sharp rise in electricity prices, there is a significant risk that 60% of UK businesses could close, writes Bloomberg.

Group Make UK, representing the interests of British manufacturers, said that over the past year almost for half of the enterprises electricity bill in the country jumped more than 100%, the publication says

"The current crisis is putting producers in front of a stark choice between reducing production or stopping it completely," - experts say.

It is noted that British factory industry is already in decline, as evidenced by the purchasing power index S&P Global. According to the MakeUK group, 13% factories already reduced hours of work or try not to work during peak hours, and 7% suspend production for longer periods of time.

And in the United States, the rise in food prices was the highest since the end of May 1979.

Consumer prices in the United States in August rose on an annualized basis 8,3%, reported US Department of Labor. Compared to the previous month, the indicator decreased (it was 8,5%), but turned out to be worse than expected - analysts predicted a decline to 8,1%, according to the report of the financial department.

Core inflation (increase in prices for goods and services, excluding food and energy) amounted to 6,3% against expectations of 6,1%. The biggest increases were in housing, food and medical care. The department emphasized that the increase in food prices (+ 11,4 %) was the maximum from the end of May 1979.

And at the end of June US consumer inflation in annual terms amounted to 9,1% - record since 1981 years.

Problems in the European economy drew attention even in China

European officials have found themselves in a quandary trying to find a way out of the energy crisis and its aftermath. At the same time, more and more Europeans come out to protest demonstrations, expressing dissatisfaction with rising energy prices and inflation, пишет Chinese edition of the Global Times.

The publication notes that faced with the energy crisis, European leaders prefer politics and ideology, but not the lives of people and not the economy.

“They are pursuing a tough course towards Russia and following the instructions of the United States. According to experts, it is the United States that is the only winner in the conflict between Russia and Europe. They are pushing Europe to take aggressive actions against Russia, and the EU suffers from energy shortages as a result. The United States, meanwhile they are struggling to sell oil and gas to Europe, making good money on it. Daily volume of deliveries to the continent is more than three times the average of last year, " - writes the Chinese edition.

According to Chinese economists, the energy crisis is not only wreaking havoc on the European economy, but also creating political repercussions such as rising populism that will further undermine EU unity and lead to a major recession over time.

Recall that economic situation in Ukraine also leaves much to be desired. So, according to forecasts of the Ministry of Economy, it is expected that in 2023 the dollar exchange rate will reach 50 hryvnias, and the consumer price index will be 30,6%.

Earlier we wrote that the United States recently expressed concerns that against the backdrop of the energy crisis and the rapid growth of inflation, support for sanctions pressure on Russia in Europe may decrease.

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