Italian inflation surges in October ahead of eurozone figures

Published Fri, Oct 28, 2022 · 08:42 PM

ITALIAN inflation surged to a new record high in October, data showed on Friday (Oct 28), underscoring the economic challenges facing new Prime Minister Giorgia Meloni and increasing the risk of a further rise in the eurozone as a whole.

Italy’s EU-harmonised consumer price index (HICP) jumped a preliminary 12.8 per cent year-on-year, the highest level since the series began in 1996, from 9.4 per cent in September, statistics bureau ISTAT reported.

Energy price inflation leapt to 73.2 per cent from 44.5 per cent the month before, ISTAT reported, while core inflation, net of energy and fresh food, climbed to 5.7 per cent from 5.3 per cent.

“Inflation at this level is one of the immense economic problems for the new government, which only has limited resources to tackle them because of the huge public debt,” said Lorenzo Codogno, the head of LC Macro Advisors and a former chief economist at the Italian Treasury.

He said Meloni should direct government help to poor families rather than the general population, by directly paying a proportion of their energy bills and thus easing their financial burden and also reducing prices.

“Looking ahead, conditions don’t seem to be there yet to call the inflation peak,” ING bank said in a note to clients, citing pipeline pressures evident in producer price data for September.

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“What we will likely see is more volatility in headline numbers over the next few months.”

Energy driven, sky-high inflation around the eurozone led the European Central Bank (ECB) to hike its deposit rate on Thursday for the third time since July, but prices now seem to be rising faster in Italy than in most of its eurozone neighbours.

Inflation in France jumped to 7.1 per cent in October from 6.2 per cent the month before, while in Spain it eased to 7.3 per cent from 9.0 per cent. German regional data pointed to a rise from September’s 10.9 per cent rate, against expectations for a stable reading.

Data for the 19-nation currency bloc will be released on Monday.

On Friday the ECB’s Survey of Professional Forecasters, a key input in policy deliberations, showed eurozone inflation will be higher than feared for years to come and could stay above the bank’s 2 per cent target indefinitely.

The share of income Italians were able to save between March and August fell by 78 per cent compared with the first two months of the year, research by online bank N26 showed, a much sharper drop than seen in Germany, France or Spain.

Meloni, sworn in on Saturday at the head of a right-wing coalition, faces a raft of problems for the eurozone’s third largest economy which the Treasury says is probably now in recession.

Consumer morale plunged to a nine-year low this month, ISTAT reported on Thursday, as the surge in the cost of living erodes household savings.

Italy’s new Economy Minister Giancarlo Giorgetti said on Thursday he hoped the ECB would take account of the slowing eurozone economy in its future policy decisions.

After Friday’s “shocking” inflation release, the Italian government will likely feel compelled to speed up the launch of a new package of measures to help consumers cope, ING said.

ISTAT will release a flash estimate for third quarter gross domestic product on Monday, with analysts surveyed by Reuters expecting a flat reading compared with the previous three months. REUTERS

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