Frankfurt, Oct 31 (AP) Inflation hit a new record in the 19 countries that use the euro currency, fuelled by out-of-control prices for natural gas and electricity due to Russia’s war in Ukraine.<\/p>\n
Economic growth also slowed ahead of what economists fear is a looming recession, largely as a result of those higher prices sapping Europeans’ ability to spend.<\/p>\n
Annual inflation reached 10.7 per cent in October, the European Union’s statistics agency, Eurostat, reported on Monday.<\/p>\n
That is up from 9.9 per cent in October and the highest since statistics began to be compiled for the eurozone in 1997.<\/p>\n
Natural gas prices skyrocketed in the wake of the invasion of Ukraine as Russia throttled back pipeline supplies to a trickle of what they were before the war.<\/p>\n
Europe has had to resort to expensive shipments of liquefied gas that come by ship from the US and Qatar to keep generating electricity and heating homes.<\/p>\n
While liquid gas succeeded in filling storage for the winter, the higher prices have made some industrial products such as steel or fertiliser expensive or simply unprofitable to make.<\/p>\n
Consumer spending power has been drained at shops and elsewhere as more income goes to pay for fuel and utility bills.<\/p>\n
Natural gas prices for short-term purchases have eased recently but remain high on markets for coming months, suggesting that costly energy may be a persistent drag on the economy.<\/p>\n
A survey of professional forecasts by the European Central Bank showed expectations for inflation next year rose to 5.8 per cent from 3.6 per cent.<\/p>\n
The inflation outbreak has been an international phenomenon, sending price increases to near 40-year highs in the US as well.<\/p>\n
Eurostat figures showed prices for food, alcohol and tobacco have increasingly joined energy prices as a major contributor, rising 13.1 per cent, while energy prices rose an astronomical 41.9 per cent.<\/p>\n
The economy, which had been rebounding from the COVID-19 pandemic, showed growth of 0.2 per cent in the July-September quarter, slowing from 0.8 per cent in the second quarter.<\/p>\n
Economists say a major reason is higher prices, and many are predicting the economy will shrink over the last months of this year and the first part of next year.<\/p>\n
Higher inflation has sent a chain of tremors through the economy.<\/p>\n
It has led the European Central Bank to raise interest rates at the fastest pace in its history with two three-quarter point increases at its October 27 and September 8 meetings.<\/p>\n
That has sent market borrowing costs higher for companies and governments and raised concerns that the war on inflation will hurt growth.<\/p>\n
Meanwhile, higher bond market costs for governments remain a concern for heavily indebted eurozone countries such as Italy. (AP)<\/p>\n
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