Good headlines are coming out of the Eurozone this morning, as the inflation rate slowed to 2.9 per cent in October. This is a spectacular fall from its double-digit peak last October, when the rate sat at over 10 per cent. Today’s news brings inflation to a stone’s throw away from the European Central Bank’s target of 2 per cent. But it’s not without trade-offs.
Alongside today’s inflation news, we have also learned that growth across the Eurozone took a hit, averaging a 0.1 per cent contraction between July and September this year. This dip was worse than the consensus, which expected to see a small uptick in GDP. Some growth seen in countries like France and Belgium were outweighed by contractions elsewhere – notably in Germany. The biggest economy in Europe now finds itself halfway towards a recession (two consecutive, quarterly contractions) with business output contracting.
Weaker growth is often the price paid for getting the inflation rate down.
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