Inflation in the euro zone is stabilizing and growth is holding up

Finally the peak of inflation in the euro zone? After the United States, where the pace of price increases has started to slow down, the same trend could be appearing on the Old Continent. The rise in prices reached 10% over one year in November, against 10.6% in October. This is the first ebb since June 2021 and a glimmer of hope that the crisis is starting to stabilize. This statistic, published on Wednesday 30 November by Eurostat, joins a series of economic indicators in recent weeks which show that while growth is slowing, and a recession remains likely this winter, it is holding up better than expected.

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This slight breather in prices is the logical consequence of the decline in commodities since mid-2022. Gas, which hit historic highs when Vladimir Putin began closing the valves this summer, went from peaking at nearly 350 euros per megawatt-hour at the end of August in Europe to 136 euros currently. Oil has fallen by a third since peaking in June. Another improvement: the bottlenecks in the supply chains, which multiplied during the exit from the Covid-19 pandemic, are gradually returning to order.

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Each of these prices remains very high compared to the average of previous years, but the shock is fading. As a result, energy inflation in the euro zone, which was 41.5% in October, is “only” 34.9% in November. Nine countries – out of nineteen – recorded a decline or stagnation in inflation during this month, including Germany, Spain and the Netherlands. In France, inflation is stable, at 7.1%, according to the harmonized indicator (against 6.2% for the national index), remaining the second lowest in the euro zone. “We wouldn’t be surprised if inflation rose again in December or January [2023]because the numbers are very volatile, but there is little doubt that it will drop rapidly next year”says Andrew Kenningham, an economist at Capital Economics.

Violent for households

Of course, the price shock for households is no less violent. In the euro zone, wages increased by around 5.2%, according to estimates from Indeed, a recruitment website. Or a loss of purchasing power of at least five points for households. The difficulties are cushioned by State aid (tariff shield, allocations to the poorest households, etc.), which have multiplied across the continent, but they remain real.

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