EU inflation dropped to 3.1% in January

(CN) — During the first month of the year, inflation in the European Union continued its slow decline toward 3%, according to data published Thursday by Eurostat.

The EU ended 2023 at 3.4% inflation and began 2024 at 3.1% — more than five points lower than at the beginning of 2023, when inflation topped 8%.

Denmark and Italy reported the lowest January inflation rates in the EU at just under 1%. Italy prices are expected to rise, averaging 2% inflation over the course of the year, according to the EU’s winter forecast, which attributes the trend to rising wages.

“As the main collective labor contracts are being gradually renewed, workers are expected to recover the past losses of purchasing power,” [according](http://EU inflation continues drop to 3.1% in January) to EU’s economists’ report on Italy.

At 7.3%, Romania reported the highest January inflation rate, followed by Estonia, 5%, and Croatia, 4.8%. While more than four points over the EU average, Romania’s inflation rate has decreased as much over the past year, when inflation hit 13.4% in January 2023. Economists anticipate costs continuing to ease for Romanians throughout the year.

“The easing of inflation can be attributed to a significant slowdown in private credit growth amid tight monetary conditions, and to lower energy and food prices,” economists explained in Romania’s winter forecast.

By the year’s end, economists anticipate EU inflation settling around 3%, down from 6.3% last year. EU economists remain hopeful that inflation will continue to decline across member states through next year, with rates as high as 4.5% in Portugal and as low as 1.5% in France.

Rising energy costs largely drove the inflation spike, from 0.3% in January 2021 up to 11.5% in September 2022 when government policies aimed at reducing EU dependence on Russian oil largely kicked on.

Trade between the EU and Russia plummeted throughout 2022 and remained low through 2023, according to Eurostat. In February 2022, the EU imported nearly 10% of goods from Russia. By the end of 2023, the EU was down to sourcing just 2% of goods from Russia; at the same time, the goods the EU sent to Russia made up just 1.4% of European exports.

Energy inflation decreased 7% in January, a complete U-turn from the prior year’s 19% energy hike.

Unprocessed foods were the largest driver of inflation in January with price hikes of near 7%. Other categories also indicated rises, including processed food, alcohol and tobacco, up 5.2%. Services rose 4%.

The U.S. reported a similar rise in the consumer price index of 3.1% in January, a slight decline from December.

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