Eurozone inflation drops dramatically to 2.9%

Energy prices across the eurozone are expected to drop by 11.1% this month. 

Annual inflation in October across the eurozone has dropped significantly to 2.9% from the 4.3% recorded in September, the latest flash estimate from the EU shows.

Last week, data from the Central Statistics Office (CSO) showed that Ireland’s Harmonised Index of Consumer Prices (HICP) — which allows the EU to compare inflation across the eurozone — dropped to 3.6% from 5%.

The decline was driven by a fall in energy prices which were estimated to have fallen by 0.3% in the month and decreased by 4.2% over the 12 months to October.

According to the EU, the main drivers of inflation in October all saw a reduction from rates seen in September.

Food, alcohol. and tobacco inflation is expected to have the highest annual rate of 7.5% in October compared to 8.8% in September. Services inflation is expected to be 4.6% down from 4.7% while inflation in non-energy industrial goods is expected to be 3.5% down from 4.1%.

Energy prices are expected to drop 11.1% in October compared to a price drop of 4.6% in September.

The data shows that Slovakia, Croatia, and Slovenia, are expected to have the highest rates of inflation during October at 7.8%, 6.7%, and 6.6% respectively.

The EU also expects Belgium and the Netherlands to experience deflation during the month of October at rates of -1.7% and -1% respectively.

However, while inflation might be coming down, the EU is flirting with recession as gross domestic product (GDP) decreased by 0.1% in the period July to September compared to the previous three months.

Ireland had the largest decrease in GDP in the EU dropping 1.8% during the same period.

Compared to the July to September period last year, Ireland’s GDP dropped 4.7%.

Ireland’s GDP numbers are heavily impacted by the activity of multinationals based here and as such is not used as an indicator for activity in the domestic economy. Modified domestic demand is the preferred metric as it strips out the activity of multinationals.

According to the Eurostat economic data, when compared to the same period last year, GDP in the EU and the eurozone increased by 0.1%.