Euro Inflation without Energy Rages to New Record. Overall CPI Second Worst Ever

The ECB’s horror show.

By Wolf Richter for WOLF STREET.

“We do not see the components or the direction that would lead me to believe that we’ve reached peak inflation and that it’s going to decline in short order,” ECB President Christine Lagarde told the European Parliament on Monday.

And so it came to pass today: In the 19 countries that use the euro, the CPI without the energy products that consumers buy (gasoline, diesel, electricity, natural gas piped to the home, etc.) rose to a record 7.0% in November, continuing the breath-taking spike.

It had started in the summer of 2021, and by October 2021, it hit 2% and by February 2022, it hit 3.1% and hasn’t looked back since, as inflation has been spreading deeper into the economy, beyond the volatile energy prices. And it’s a bad sign, and it was what Lagarde was referring to:

Inflation in the energy products and energy services that consumers buy – mostly gasoline, diesel, electricity, natural gas piped to the home, and heating oil – was still huge, and the CPI for those components jumped 34.9% from a year ago, but that was less than the 41.5% spike in the prior month, which helped make overall inflation a little less horrible.

The overall CPI rate, at 10.0%, was the second worst ever, slightly less horrible than in October (10.6%), which had been the worst in the history of the Eurozone data going back to 1997, according to Eurostat data.

Inflation began spiking in early 2021, a year before Russia’s invasion of Ukraine, when inflation broke out globally while the pandemic money-printing and deficit-spending stimulus binge was still raging.

In July 2021, Eurozone inflation shot past the ECB’s target of 2%, hit 4.9% in November 2021, and 5.1% in January 2022 before Russia invaded Ukraine. Russia’s war in Ukraine made the trends worse:

Yet inflation subsidies held down CPI across the Eurozone, as governments implemented all kinds of schemes, subsidies, tax cuts, and price caps to reduce the bite of this inflation, particularly related to energy products and services, public transportation, and the like.

Inflation by Eurozone country.

In Germany, inflation was just a tad less horrible than in the prior month: 11.3%, based on the harmonized method used by Eurostat, after the 11.6% shocker in October. By Germany’s own CPI measure, the October shocker had been the worst since 1951. Already in November 2021, well before Russia’s invasion of Ukraine, inflation hit what was then an unthinkably high rate of 6.0%.

In the three Baltic countries, overall CPI inflation still raged at over 21% in November, which was slightly less horrible than the raging in October.

A new high in two countries: Overall CPI hit a new high in Finland (9.0%) and Slovakia (15.1%).

In France, November inflation matched the October record (7.1%).

The ECB’s own horror show.

After years of whatever-it-takes money printing and negative interest rate policy – the greatest central bank absurdity ever concocted – the ECB is now facing the results: raging inflation.

The ECB finally got started reversing course. At its meeting on October 27, it hiked its deposit rate by 75 basis points, after 75 basis points in September and 50 basis points in July, for a combined 200 basis points in three meetings, the fastest move in the ECB’s history, as “inflation remains far too high and will stay above the target for an extended period,” as it said. And more rate hikes are on the table.

But it started with the deposit rate at -0.5%, and the 200-basis-point hikes only took the rate to 1.5% — while inflation is raging at 10%.

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.