Eurozone inflation hits record 8.9pc

Inflation in the European countries using the euro currency shot up to another record in July, pushed by higher energy prices driven partly by Russia's war in Ukraine, but the economy still managed some meagre growth.

Annual inflation in the eurozone's 19 countries rose to 8.9 per cent in July, an increase from 8.6 per cent in June, according to the latest numbers published on Friday by the European Union statistics agency.

Inflation has been running at its highest level since 1997, when record-keeping for the euro began.

Energy prices surged by 39.7 per cent, slightly lower than the previous month, while prices for food, alcohol and tobacco rose by 9.8 per cent, faster than the increase posted last month.

The eurozone's economy, meanwhile, grew from April through June, expanding by 0.7 per cent compared with the previous quarter and up four per cent over the same period in 2021.

That contrasts with the United States, whose the economy has contracted for two straight quarters, raising fears of a recession with inflation at 40-year highs.

But the job market is even stronger than before the COVID-19 pandemic, and most economists, including Federal Reserve Chair Jerome Powell, have said they do not think the economy is in recession.

Many, however, increasingly expect an economic downturn in the US to begin later this year or next, much like in Europe.

Europe's proximity to the war in Ukraine and its reliance on Russian energy mean it is at risk of recession as Moscow throttles down flows of natural gas that power factories, generate electricity and heat homes in the winter.

More reductions this week through a major pipeline to Germany, Nord Stream 1, have heightened fears that the Kremlin may cut off supplies completely.

That would force rationing for energy-intensive industries and spike already record-high levels of inflation driven by soaring energy prices, threatening to plunge the 27-nation bloc into recession.

While European Union governments approved a measure this week to reduce gas use by 15 per cent and have passed tax cuts and subsidies to ease a cost-of-living crisis, Europe is at the mercy of Russia and the weather.

A cold winter could draw down storage levels that governments are now scrambling to fill but been made infinitely harder by Russia's cuts.

Austrlaian Associated PressBack to Breaking News

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