Eurozone inflation spikes to record 4 pct in June

Driven by record oil prices, eurozone inflation spiked in June to the highest rate since the launch of the euro in 1999 after the European Unions Eurostat data agency registered a rate of 3.7 percent in May.
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Oil prices hit records over $140 a barrel in June, pinching the purchasing power of consumers already struggling to cope with soaring food prices.

Eurostat's data showed that transport fuel prices surged 18.5 percent in June over one year while the cost of air transport spiked 11.5 percent and heating oil jumped a whopping 53.1 percent.

Soaring oil prices lifted overall inflation in European economic heavyweight Germany to a near 15-year high while consumer prices grew at the fastest rate in nearly 17 years in France, the two countries statistics offices said Wednesday.

Meanwhile, inflation in the 27-nation European Union rose even faster than in the eurozone, hitting 4.3 percent in June after 4 percent in May, according to Eurostat.

Record inflation, which has triggered protests by fishermen and truckers in June, adds to consumer and businesses pains just as they are struggling to cope with flagging economic activity.
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Despite the record growth in consumer prices in June, Eurostat said that underlying inflation grew much less quickly.
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Excluding volatile items like energy, food, alcohol and tobacco prices, inflation rose to 1.8 percent in June from 1.7 percent.
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Although underlying inflation remained relatively tame, the jump in the headline figure to 4 percent brought consumer prices to nearly double the European Central Banks comfort zone, which it defines as close to but less than 2 percent.
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Despite slowing economic growth in Europe, the ECB raised its main lending rate earlier this month by a quarter percentage point to 4.25 percent in an attempt to keep a lid on inflation.
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Even though inflation looks likely to remain high, economist Jonathan Loynes at consultants, apital Economic said the ECB was unlikely to raise interest rates higher in the coming months.
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"We still think that this month’s rate hike will prove to be a one-off rather than the start of a new phase of monetary tightening," Loynes said.
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"But even with the economy clearly slowing, it will be some time yet before the ECB is prepared to think about cutting rates," he added.
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With crude oil prices holding at around $140 a barrel, many economists expect inflation to remain high, with new records likely in the coming months.
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"We suspect that moderating food inflation together with resilient energy inflation will remain the reference picture for a while. We see headline inflation accelerating further during the summer," said economist Marco Valli at Italian bank Unicredit.

Photo: AFP