Inflation in Europe hits new records

Inflation in Europe has been on an unprecedented scale recently. Energy and food prices in the region continue to soar.

According to initial estimates, the cost of goods in the 19 countries using the euro rose 10.7% year-over-year in October, up from 9.9% in September.

Energy prices soared nearly 42% from a year ago, and the cost of food, alcohol and tobacco rose more than 13%.

Notably, prices in the service sector rose faster in October than in the previous month. This fact could be seen as a wake-up call for policymakers, as they hoped that easing pressure in the supply chain would help reduce inflation.

In Europe's largest economic region, Germany, inflation jumped to 11.6%. In Italy, it rose to 12.8%, and in France, to 7.1%.

Despite the problems with inflation, Europe's economy is still growing, if only slightly. Between July and September, GDP rose 0.2% from the previous quarter.

Nevertheless, economists expect a recession in winter as energy prices will force Europeans to watch their wallets and encourage businesses to accumulate cash. Natural gas prices are also hurting industrial production.

ING senior economist Bert Colijn said that in general, the picture remains bleak. Colijn also said that the economic recovery from the lockdowns has boosted demand for services, but that effect is now waning. With rising interest rates and an uncertain economic outlook, investment expectations are also weakening.  Consequently, the economy is expected to contract in the coming quarters.