By Swann Collins, investor and consultant in global affairs. Eurasia Business News – November 4, 2021
The rate of annual inflation of the euro zone hit 4.1% in October 2021, against 3.4% in September and 3.0% in August, according to a flash estimate issued by Eurostat, the statistical office of the European Union.
Regarding the main components of inflation in the euro area, energy is expected to experience the highest annual rate in October (23.5%, compared to 17.6% in September), followed by services (2, 1%, compared to 1.7% in September), industrial goods excluding energy (2.0%, compared to 2.1% in September) and food, alcohol & tobacco (2.0%, stable compared to September).
In the second quarter of 2021, real household consumption per capita increased by 3.3% in the euro area, following a decrease of 2.0% in the previous quarter. Real household income per capita increased 0.7% in the second quarter of 2021, following an increase of 0.6% in the first quarter.
In the third quarter of 2021, seasonally adjusted GDP grew by 2.2% in the euro area and 2.1% in the EU, compared to the previous quarter, according to the preliminary flash estimate released by Eurostat , the statistical office of the European Union.
The euro zone gathers 19 European countries, which use the single currency Euro.
According to the OECD, the annual rate of consumer price inflation in the G20 economies is projected at around 4.5% in 2021.
Year on year, energy prices rose 18.9% in the OECD area. This is the highest inflation rate since September 2008.
The economist Milton Friedman famously said about inflation :
“It is always and everywhere, a monetary phenomenon. It’s always and everywhere, a result of too much money, of a more rapid increase in the quantity of money than an output.”
Soaring inflation is at the heart of meetings of the European Central Bank, but without deviating from its course. Christine Lagarde, Chairman of the ECB, postponed to December the start of potential normalization of monetary policy. She said during a speech in Lisbon on November 3 :
“In our forward guidance on interest rates, we have clearly articulated the three conditions that need to be satisfied before rates will start to rise. Despite the current inflation surge, the outlook for inflation over the medium term remains subdued, and thus these three conditions are very unlikely to be satisfied next year.”
An 4.1% annual inflation means that the euro currency lost 4.1% of its purchasing power as it was a year before. The depreciation of euro can be compensated with the gains from investments in euro such as stocks, bonds or real estate, which have well performed over the past year. However, those who cannot rely on such investments now loose purchasing power, that means that they get poorer every month.
Exchange rate as of Nov. 4, 17:33 UTC : 1 EUR = 1.16 US Dollar
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© Copyright 2021 – Swann Collins, investor and consultant in global affairs.