Dhe inflation in the euro zone fell significantly in March. As the European statistics office Eurostat announced on Friday based on an initial estimate, the inflation rate was 6.9 percent. The rate was 8.5 percent in February and 8.6 percent in January. Last year it had been in double digits at times.
This shows a development that was also recently observed in the inflation rate in Germany: The inflation rates, which had risen extremely last year, are falling somewhat – however, it is above all the upward pressure on energy prices that has eased significantly since concerns about energy shortages are no longer as great due to the Ukraine war. Even at the gas stations you don’t pay quite as much as at times last year.
The so-called supermarket inflation, i.e. the price increases for groceries and some other everyday necessities, is still considerable, even if there are signs of some improvement at the earlier stages. Travel has also become significantly more expensive before Easter.
In Germany, the inflation rate fell from 8.7 to 7.4 percent in March, according to the national method of calculating the consumer price index (CPI). According to the European calculation method of the Harmonized Index of Consumer Prices (HICP), which is used for comparison with other European countries, it was 7.8 percent, after 9.3 percent in February.
In France, the inflation rate fell to 6.6 percent in March from 7.3 percent in February. Economists had expected an even stronger decline to 6.5 percent. Although inflation in France remains at a high level, the inflation rate is lower than in Germany. In Italy, the rate fell from 9.8 to 8.2 percent. According to the estimates published so far, the inflation rate rose in March only in Slovenia, from 9.4 to 10.4 percent.
Base effect and government intervention
In the case of energy, a so-called statistical base effect is noticeable in practically all countries in the euro area. To calculate the inflation rate, prices from the previous month are compared with those of the same month in the previous year. A year ago, however, energy prices rose sharply when the war began. Therefore, from March onwards, in contrast to January and February, the current energy prices will be compared with the already high ones from the previous year. This means that the rates of increase tend to be lower – the inflation rate falls automatically, so to speak.
Government interventions in the energy market also play a part in inflation. They are quite different in the individual countries. The European Central Bank (ECB) recently criticized the fact that some state aid would not be withdrawn even where energy prices had long fallen. This could itself result in inflationary forces. The central bank had demanded that fiscal aid be “temporary”, “targeted” and “tailored” – but in many cases did not see this as fulfilled.