Energy costs drive EU inflation to record high 5.6%

(CN) — Inflation across the European Union continued to rise from 5.3% in December 2021 to 5.6% in January, according to data published by Eurostat on Wednesday. During the same period last year, inflation hit 1.2%.

This marks the highest inflation rate since recordkeeping began in 1997.

The EU’s Winter 2022 forecast anticipated rising inflation through the first two quarters of the year, driven by supply chain bottlenecks and surges in energy prices.

Across the 19-nation euro area, rising energy prices compounded by geopolitical tensions over Russia's possible invasion of Ukraine drove inflation up 2.8 points in January.

The EU imports more than a quarter of its crude oil from Russia, along with 46% of solid fuel and 40% of natural gas. Costs of energy imports increased 72.1% between December 2020 and December 2021, from 221.3 billion euros ($250.9 billion) to 380.8 billion euros ($431.8 billion).

Other products causing the spike in inflation include services, non-energy industrial goods, and food, alcohol and tobacco, which collectively contributed 2.31 points toward inflation.

When it comes to how households are hit, Eurostat found roughly 42% of household spending across the euro area is on services. Non-energy industrial goods and the food, alcohol and tobacco sector make up about 20% each, while energy only makes up about 10% of household spending.

With an overall predicted average of 3.9% inflation in 2022, the EU previously projected inflation would decline to 1.9% in 2023.

In January, France, Portugal and Sweden recorded the lowest inflation rates, all below 4%. At 12.3%, Lithuania saw the largest increase in inflation, followed by and Estonia at 11%, and Czechia at 8.8%. Czechia also recorded the highest increase in inflation between December and January, while Estonia’s rate fell slightly in January.

In the U.S., inflation rose to 7.5% in January, marking the highest yearly increase since 1982.

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