Eurozone | Energy prices put another dent in near-term recovery

The surge in European gas and electricity prices over recent months pushed energy prices to an all-time high in August, amplifying a pickup in inflation and pointing the Q4 2021 headline rate towards 4%. This will squeeze households’ disposable income, push up industry’s already proliferating cost base, and possibly accelerate the withdrawal of stimulus by the ECB next year.

What you will learn:

• Strong demand and a combination of supply-side factors have caused a surge in wholesale energy prices, with the near-term outlook subject to significant uncertainty.
• Passthrough to consumer prices varies widely across countries owing to the local energy market structure as well as the scale and type of policy response.
• We estimate the lift to inflation will be between 0.2pp and 0.3pp this year and next.