The devil is in the details of Europe’s worrying inflation data

London
CNN
—

Inflation in Europe has fallen again in February, but not as strongly as expected, and national data showed price increases accelerating in many of the region’s major economies.

Annual inflation in the 20 countries that use the euro fell to 8.5%, against 8.6% the previous month, according to an initial estimate published Thursday by the European Union statistics agency. Economists polled by Reuters had forecast an increase of 8.2%.

Contrary to the regional trend, inflation rose to 9.3% from 9.2% in Germany, Europe’s largest economy. It also increased in France – to 7.2% against 7% – and in Spain, to 6.1% against 5.9%.

worrying, Core inflation, a closely watched measure that excludes volatility in food and energy prices, jumped to 5.6% from 5.3% in the euro zone. This increases the risk that inflation will take root more deeply in the European economy, even as the pressure from high energy prices eases.

It also strengthens the case for the European Central Bank to keep raising interest rates to rein in inflation, which hit a record high of 10.6% in October.

The central bank raised its key rate last month. at the highest level since 2008. Policymakers are expected to announce another sharp increase later this month.

“The increase in core inflation in February will reinforce the conviction of ECB policymakers that significant rate hikes are needed,” said Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics, in a research note.

The main driver of headline inflation in Europe was an increase in the cost of food, alcohol and tobacco. Prices climbed 15% last month, compared to a 14.1% rise in January.

Prices for non-industrial goods and services also rose at a faster pace in February.

Energy prices rose 13.7% from 18.9% the previous month.