Cyprus was the only member state in the euro area to record deflation in August, with its annual inflation rate hitting -0.1%, according to a flash estimate from Eurostat. This unique position occurred as the overall inflation for the currency bloc ticked upward.
The European Context
While Cyprus experienced a marginal drop in prices, the annual inflation rate for the euro area is estimated at 2.1% for August, representing an increase from the 2.0% recorded in July.
The data reveals a wide divergence in price pressures across the bloc. At the other end of the spectrum, Estonia recorded the highest inflation rate at 6.2%.
What’s Driving Eurozone Inflation
According to Eurostat’s analysis, the main components contributing to the overall 2.1% inflation rate in the euro area were:
- Food, alcohol & tobacco, which is expected to have the highest annual rate at 3.2%.
- Services, which followed closely with a rate of 3.1%.
- Non-energy industrial goods, where prices were relatively stable with a 0.8% increase.
- Energy, which continued to have a deflationary effect with prices falling by -1.9%, though this was a smaller decrease than in the previous month.
Source: Stockwatch.com.cy