Europe is not doing well. We knew that the economy of the euro zone was limping and the latest statistical data confirms it: inflation shoots up to record levels, 10.7% in October, while growth is at a minimum, a modest 0.2% in the last quarter (2.1% year-on-year). It is a combination that places the European Central Bank before a complex situation, that of trying to control prices without damaging GDP. And when in doubt, you already know what the ECB's priority is. “I know it's very hard, but we have to do what we have to do. The ECB's mission is to fight inflation so that we have price stability. It is our mantra, it is our mission, it is our mandate,” its president, Christine Lagarde, told Irish television. This is how the ECB was designed, much like the Bundesbank. First, the prices; then the rest.
Therefore, everything points to new rate hikes, given that in October inflation climbed to 10.7%, an unprecedented figure, according to advance data from Eurostat. They are eight tenths more than in September, without the rise to 2% in interest rates in the last three months seeming to make a dent.
Behind this increase in prices is electricity, which continues to shoot up with an increase of 41.9%, very close to the maximum in June. Food also increased by 15.4% in fresh and 12.4% in the group of processed, alcohol and tobacco. On the other hand, core inflation, which does not take energy or fresh food into account, also rose four tenths, which shows how the extra cost of energy has been transferred to all products. It increases to 6.4% in October.
A noteworthy fact is that Spain, with an inflation rate of 7.3%, has gone from being one of the largest economies with the highest inflation to having the second lowest in the entire eurozone, only above France, with two tenths less, which is the country that has best controlled prices. With this figure, Spain is well below the euro zone average, and also far behind Germany (11.6%) and Italy (12.8%). The record above is held by the Baltic countries, with percentages above 20%.
“Inflation in October in Spain was already 3.4 percentage points below the average area of the euro zone. This confirms the effectiveness of the Government's measures in controlling inflation”, they indicate from the Ministry of Economy.
On the other hand, while prices are skyrocketing, growth is minimal. In the third quarter, from July to September, the GDP of the euro zone has only increased by 0.2% quarter-on-quarter, far from the previous 0.8% and with several countries with negative growth. The truth is that the slowdown was announced and has not been a surprise, but it reinforces the possibility that the eurozone will enter a recession in the coming quarters. It is an economy that is feeling the effects of soaring inflation and very expensive energy, as well as supply chain problems. You can add the rise in interest rates as one more obstacle.
Spain grows at the same level as the euro zone and France, 0.2%. It is somewhat less than Italy (0.5%), while Germany gives a positive surprise with an increase in GDP of 0.3%, two tenths above the previous quarter. In year-on-year terms, Spain is the second country with the highest growth, 3.8%, more than one point above the eurozone average (2.1%), as can be seen in the graph.
“While the third quarter was more resilient than expected, a winter recession in the eurozone is imminent. The question is how deep it will be”, launched the economists of Oxford Economics. At the moment, it is accompanied by a more moderate climate than usual, which helps save energy, and they have done their homework by filling the gas reserves, but deep down, gas flows and prices depend to a large extent on the evolution of the war .
