The cost of living increased more than expected in December bucking expectations that inflation would drop by 2.1% across the single currency region.
Consumer inflation in the 17 nation Eurozone rose to 2.2% in December according to the EU’s statistics office Eurostat. The price increases were highest in the food and services sector which together make up 60% of Eurostat’s index. Inflation in those sectors suggest that EZ families spent more during the holiday period after months of belt tightening as they struggle to ride out Europe’s worst economic crisis in decades.
Europe’s leaders will be anxiously waiting to see if the region shows any signs of a recovery in the economy, which is expected to slip deeper into recession in 2013. The rest of the world’s major economies meanwhile are expected to grow pulling the world out of the global economic crisis.
Last Friday saw a business survey suggest that the Eurozone was now past the worst that could happen, although a return to the economic growth needed to address record unemployment levels is still far off.
Europe’s biggest economy, Germany posted separate data showing that consumer prices in six regions climbed a lot faster than expected in December.
“Travel, hotel and restaurant prices have picked up and this year the rise was a little sharper than on average in past years,” said Ulrike Rondorf, an economist at Commerzbank.
All eyes are now on the European Central Bank as economists expect the Bank to cut interest rates further to a new record low below the 0.75% level, in an attempt to get the economy moving again. With the cost of borrowing already so low the impact will be minimal at best.
The ECB meets on January 10th and will announce any rate cuts and future plans for finally ending the Euro crisis.
The Pound to Euro exchange rate is currently trading at 1.2307
The Pound to US Dollar exchange rate is currently trading at 1.6047
The Pound to Australian Dollar exchange rate is currently trading at 1.5294
The Euro to US Dollar exchange rate is currently trading at 1.3036
The Euro to Pound exchange rate is currently trading at 0.8123
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