Rise in prices within the eurozone at their lowest levels in nearly three years.
The Eurozone observed a decrease in price increase velocity, reaching its lowest point since 2019 in August. The inflation rate stood at 2.2%, marking the smallest annual escalation in consumer prices since July 2021, according to Eurostat data. The primary factor behind this downturn was the considerable drop in energy costs across the 20 Eurozone countries. Meanwhile, consumer prices for goods such as food, tobacco, and alcohol, along with services continued to trend upward at an above-par pace.
Inflation peaked at 4.5% in Belgium and barely breached the 1% threshold in Latvia and Lithuania, Eurostat disclosed. Central Bank of Germany reported an inflation rate of 2%, slightly diverging from the previous day's 1.9% figure, attributed to different calculation methods. Eurostat relies on the harmonized consumer price index for cross-comparisons between Eurozone countries.
The European Central Bank aims for an inflation rate of 2%. After July saw a 2.6% yearly price rise, August witnessed a slight decrease to 2.5%.
Core inflation surpassing target
ECB Executive Board member Isabel Schnabel welcomed the falling inflation rate, though she voiced concerns over the prospects of an interest rate reduction in September. In a speech delivered in Tallinn, Estonia, she emphasized the need for "gradual and cautious" cuts, due to the "persistent price pressure in the services sector."
In this sector, consumer prices increased the most in August, with a 4.2% uptick as per Eurostat data. The core inflation, excluding energy and food prices, continues to surpass the 2% target, pegging at 2.8% in the Eurozone.
The ECB slashed its key interest rates for the first time in nearly five years in early June. Refinancing rate now stands at 4.25%, while the deposit rate is at 3.75%. The potential for further interest rate cuts depends on the ECB's September 13 governance council meeting.
EU labor market remains resilient
Unemployment in the Eurozone maintained a relatively stable rate, Eurostat revealed. July saw a reduction in the seasonally adjusted unemployment rate to 6.4%, marking a new record low. Approximately 11 million individuals remained jobless within the Eurozone, and around 13.2 million across the EU, with its nearly 450 million inhabitants.
For Germany, Eurostat reported an unemployment rate of a significantly lower 3.4%, with Poland, Malta, and Slovenia registering even lower figures within the EU. Meanwhile, unemployment rates remain much higher in countries like Spain, Greece, and the Baltic states.
Germany's Federal Employment Agency, however, forecasts a July unemployment rate at a considerably higher 6.0% and an August increase to 6.1%. A different calculation method underpins this data.
Despite the decrease in inflation rate in August, the Eurozone's core inflation, excluding energy and food prices, remains above the ECB's target at 2.8%. The robust European labor market continues to demonstrate resilience, as the unemployment rate in July dropped to a record low of 6.4%.
