Oh! What big news from the Presstitutes. Happy Days are here again in Europe. Inflation across the 19-member Eurozone eased to 8.5 percent in January, down from 9.2 percent in December, the European Union’s statistics office reported.
And more good news? Energy prices jumped another 17.2 percent last month, but the business media cheered that it was a lesser increase than December’s 25.5 percent.
Making a bad situation worse, wage growth also slowed. Worker pay grew by 4.9 percent in January, barely half of inflation’s rise. Employees pocketed 5.2 percent more the month before.
Unemployment remained steady at 6.6 percent.
Indicators show that the European Central Bank’s (ECB’s) series of stiff interest rate increases has slowed both business and consumer activity, effects the bank sought with its rate hikes.
Banks are making dramatically fewer loans, ECB data showed, with banks approving 11 percent fewer business loans than a year earlier after tightening their lending criteria. Applications for home loans fell in January by the biggest monthly drop on record.
Consumer demand in general is down, ECB figures confirmed, due largely to energy prices that skyrocketed due to Russia’s cutoff of natural gas supplies, the war in Ukraine, and resulting Western sanctions.
With inflation weakening, the ECB continued its fight against runaway prices by raising its key interest rate by a half point on 2 February, lifting it to 2.5 percent.
In a statement, the ECB said it “intends” to add another half point to the rate next month.
TREND FORECAST: Even though inflation is easing across Europe, prices are still increasing twice as fast as wage increases. Business investment is down; so is consumer spending.
With the global economy slowing, prices still rising, interest rates up, and the U.K.’s economy crashing (see “U.K Economy Tanks as People Stop Working” in this issue) Europe will spend at least the last half of this year in recession, barring an unforeseeable positive event.