<p>As gasoline prices dropped and the European Central Bank’s quick interest rate rises took effect, the inflation that has been plaguing European consumers dropped drastically to 2.9% in October—its lowest level in more than two years.<img decoding=”async” class=”alignnone wp-image-260377″ src=”https://www.theindiaprint.com/wp-content/uploads/2023/10/theindiaprint.com-october-saw-a-decrease-in-european-inflation-to-2-9-as-a-result-of-decreasing-gaso-750×450.jpg” alt=”theindiaprint.com october saw a decrease in european inflation to 2 9 as a result of decreasing gaso” width=”1397″ height=”838″ srcset=”https://www.theindiaprint.com/wp-content/uploads/2023/10/theindiaprint.com-october-saw-a-decrease-in-european-inflation-to-2-9-as-a-result-of-decreasing-gaso-750×450.jpg 750w, https://www.theindiaprint.com/wp-content/uploads/2023/10/theindiaprint.com-october-saw-a-decrease-in-european-inflation-to-2-9-as-a-result-of-decreasing-gaso-768×461.jpg 768w, https://www.theindiaprint.com/wp-content/uploads/2023/10/theindiaprint.com-october-saw-a-decrease-in-european-inflation-to-2-9-as-a-result-of-decreasing-gaso-150×90.jpg 150w, https://www.theindiaprint.com/wp-content/uploads/2023/10/theindiaprint.com-october-saw-a-decrease-in-european-inflation-to-2-9-as-a-result-of-decreasing-gaso.jpg 1000w” sizes=”(max-width: 1397px) 100vw, 1397px” title=”October saw a decrease in European inflation to 2.9% as a result of decreasing gasoline costs 6″></p>
<p>However, official data indicates that the economic production of the 20 eurozone members contracted by 0.1% during the July–September quarter, offsetting the positive news.</p>
<p>Inflation plummeted from an annual 4.3% in September as gasoline costs fell by 11.1% and painful food inflation moderated, to 7.5%.</p>
<p>The inflation rate has decreased to less than 3% from a high of more than 10% in October 2022, putting it at least close to the European Central Bank’s aim of 2%, which is seen to be the best for the economy. Since July 2021, the reading has not been this low.</p>
<p>However, after months of near-zero production stagnation, growth vanished as output decreased.</p>
<p>Out of the 20 nations that use the euro, Germany, the biggest, had a 0.1% decline in economic production, while France, the second-largest, only managed a 0.1% rise, down from 0.6% the previous quarter.</p>
<p>According to Oxford Economics researcher Rory Fennessy, a statistical anomaly involving Ireland may have pushed Europe into negative territory. Ireland’s 1.8% GDP decline was the biggest among the eurozone’s countries, but it is mostly due to the financial woes of the region’s multinational corporations.</p>
<p>He said in a research note that the economy would not pick up speed in the next months and that salaries must keep up with inflation. He said, “A period of economic stagnation is ahead for the eurozone.”</p>
<p>The European Central Bank quickly raised interest rates, which is why the inflation rate is lower now. Typically, higher central bank rates are used as a countermeasure to excessive inflation. They affect the cost of borrowing throughout the economy, driving up the cost of credit for major expenditures like houses or the expansion of companies or offices. As a result, price rises are curbed and the demand for products is decreased.</p>
<p>High rates, however, may potentially impede progress. They have targeted credit-sensitive industries, such as the building of new homes and commercial buildings, in recent months. In the meanwhile, persistent inflation has remained high enough to prevent consumers from spending as much as they had to save more money for necessities like food and electricity bills.</p>
<p>Because core inflation, which does not include volatile fuel and food costs, is still higher than headline inflation, at 4.2%, the future trajectory of inflation toward the ECB’s objective remains unknown. In the meanwhile, there has been a “huge decline” in other signs of future inflation, such as corporate forecasts for selling prices, according to Capital Economics deputy chief eurozone economist Jack Allen-Reynolds.</p>
<p>Due to shortages of components and raw materials, the world economy began to recover from the COVID-19 epidemic, which precipitated the present inflationary spike. When Russia invaded Ukraine, it became worse and Moscow shut off most natural gas to Europe, which drove up energy costs.</p>
<p>Europe’s weak economy stands in stark contrast to the US’s strong 4.9% growth in the same quarter, driven by consumers spending more freely and companies replenishing their inventories in spite of the Federal Reserve’s similarly swift hikes in interest rates.</p>
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