Euro zone inflation was unchanged in September from a month earlier, after the EU’s statistics office revised down its first estimate, and the reading might have been lower were it not for a double-digit jump in clothing prices ahead of Europe’s winter.
Consumer prices in the 17 countries sharing the euro rose 2.6 per cent in September on an annual basis – the same level as August, Eurostat said on Tuesday, lower than the 2.7-per-cent rise economists polled by Reuters had forecast.
Eurostat’s flash estimate released two weeks ago was 2.7 per cent for September.
Arguably more significant was the euro zone’s €6.6-billion ($8.54-billion U.S.) trade surplus for August, which Eurostat also released, as Europe’s indebted Mediterranean began to show signs of competitiveness once again, growing their exports.
Even as the euro zone suffers its second recession in two years, the cost of living has been kept high by world oil prices, making life difficult for the European Central Bank that has cut interest rates to a record 0.75 per cent low.
Further cuts to the cost of borrowing seem difficult to justify when inflation has been above the bank’s target of just below 2 per cent for almost two years.
But while energy was again a factor in September, it was clothing that surprised, with prices jumping 14 per cent from August and accounting for almost all the inflation pressure in the month, as households splurged on clothes ahead of the European winter.
Countries such as Greece, where the debt crisis erupted three years ago, are highly dependent on oil imports, but in a sign that Europe’s contentious austerity policies may be bearing some fruit, exports grew and imports fell in Greece, Italy and Spain in the first seven months of this year.
Italy moved to a trade surplus of €4.4-billion in the January-to-July period from a deficit in the same period a year ago, while Greece’s exports jumped 12 per cent. Spain saw export growth of 2 per cent in the period, while imports fell 3 per cent.
Wage cuts after a decade of a credit-fuelled boom have been painful for millions of southern Europeans, but by toughing it out, they are becoming more competitive as the cost of labour falls – what policy makers call “internal devaluation.”