German Inflation Quickens to Record on Fallout From War

(Bloomberg) —

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German inflation unexpectedly accelerated to the fastest since records began in the early 1990s as Russia’s war in Ukraine roiled energy markets and disrupted supply chains.

Consumer prices jumped 7.8% from a year earlier in April — higher than the 7.6% median estimate in a Bloomberg survey for the European Union harmonized reading. A national gauge hit 7.4%.

While Germany’s industry-heavy economy — Europe’s largest — is particularly exposed to surging input costs, firms and households are grappling with mounting costs across the 19-member euro zone. The European Central Bank is expected to raise interest rates in the coming months in what would mark the first hike in more than a decade.

In Spain, signs emerged on Thursday that the cost-of-living squeeze may be nearing an end. Inflation there slowed more than anticipated last month to 8.3% from 9.8% in March. ECB Vice President Luis de Guindos said later that he sees the peak of Europe’s price surge as being “very close.”

Guindos cautioned, however, that supply-chain bottlenecks are worsening as a result of pandemic measures in Asia — already a considerable obstacle for Germany before the war.

What’s more, Europe’s largest economy faces significant uncertainty after the Kremlin halted natural-gas deliveries to Poland and Bulgaria this week, raising the specter of disruptions in other EU members that rely on it for energy supplies.

Germany’s Economy Ministry said Wednesday that it expected inflation to average 6.1% over the course of 2022, before slowing to 2.8% next year. It also significantly cut its economic-growth outlook.

Inflation numbers for the wider euro area are due on Friday at 11 a.m. Frankfurt time.

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