Higher energy prices caused in part by Russia's war in Ukraine drove inflation in the euro-using nations of Europe to a new record high in July, yet the economy nevertheless managed to grow by a tiny amount.
The 19 member states of the eurozone had annual inflation of 8.9 percent in July, up from 8.6 percent in June, according to the latest figures released by the European Union statistics agency on Friday. Since the introduction of the euro in 1997, inflation has been at its highest rate.
While prices for food, alcohol, and cigarettes increased by 9.8%, they did so at a quicker rate than the 39.7% increase in energy prices that was reported last month. The economy of the eurozone, on the other hand, expanded from April to June, growing by 0.7 percent compared to the previous quarter and by 4 percent when compared to the same time in 2021. Contrast with the US, where inflation is near 40-year highs and the GDP has shrunk for two consecutive quarters, increasing concerns about a possible recession.
However, the employment market is much more robust now than it was before the COVID-19 outbreak, and the majority of analysts, including Federal Reserve Chair Jerome Powell, have stated they do not believe the economy is in a recession. However, a growing number of people anticipate that the U.S. economy will experience a slump later this year or early the following year, much like Europe. Due to its dependence on Russian energy and proximity to the Ukrainian conflict, Europe is at risk of going into recession if Moscow restricts the flow of natural gas used to heat homes, operate companies, and produce electricity.
Concerns that the Kremlin may entirely shut off supply have grown due to more decreases this week through Nord Stream 1, a significant pipeline to Germany. Rationing would be required for energy-intensive industries, and the already record-high levels of inflation brought on by rising energy prices would soar, endangering the 27-nation bloc's economy.
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