EU inflation reaches record 7.5%, topping February prediction

(CN) — Following five record-setting months, March marked a new 25-year high for inflation in the European Union at 7.5%, according to data released by Eurostat on Wednesday.

Besides representing a 1.2 point increase since February, this inflation rate is on par with last month's prediction from the European Central Bank that it would top 7% within the year.

Christine Lagarde, president of the European Central Bank, pointed to Russia’s invasion of Ukraine and soaring energy prices as shaping the troubled economy.

“How the economy develops will crucially depend on how the conflict evolves, on the impact of current sanctions and on possible further measures,” Lagarde said in a press conference on April 14. “At the same time, economic activity is still being supported by the reopening of the economy after the crisis phase of the pandemic. Inflation has increased significantly and will remain high over the coming months, mainly because of the sharp rise in energy costs.”

Amid rising costs of energy and goods, industrial production has long rebounded to pre-pandemic averages across the EU. Between last February and this year, industrial production increased 3%.

The uptick represents production increases of 9.6% in durable goods, 6.3% in nondurable goods, 4.6% in energy and 3.9% in intermediate goods over the last year.

Amid promising rises in industrial production and retail sales, Eurostat recorded noticeable decreases in the public's view of the economy throughout March, largely attributed to the eastern European war.

"This decline was mostly seen in plummeting consumer confidence, accompanied by marked losses also in retail trade and industry confidence; by contrast, confidence improved slightly in services and remained broadly unchanged in construction,” the report explained.

Over the last year, the EU exported 192 billion euros ($208 billion) worth of goods internationally, reflecting a 16% increase between February 2021 and 2022. At the same time, the EU imported 208 billion euros ($226 billion) worth of goods, generating a 15.8 billion euro ($17 billion) trade deficit.

EU members states also traded 315 billion euros ($342 billion) worth of goods amongst each other.

With cost of energy imports increasing 138% over the last year, Eurostat cites this commodity as the largest driver of the EU trade deficit.

The EU imports more than a quarter of its crude oil from Russia, along with 46% of solid fuel and 40% of natural gas.

Energy imports vary across member states, with Cyprus importing 100% of its energy. France and Croatia import more than three-quarters of their energy. Several countries import less than a quarter of their energy, including Lithuania, Spain, Luxembourg, Poland and Italy, according to Eurostat.

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