High inflation is primarily due to the continued sharp rise in energy prices

Erste Bank Research Team Erste Bank

Politics

Political leaders from Madrid to Vienna are calling for a cap on energy prices that should apply throughout the EU. The reason for this is the sharp increase in the price of electricity and gas, caused by Russian aggression in Ukraine.

The European Commission and Moderna have reached an agreement to better address Member States needs for COVID-19 vaccines for the late summer and winter period. Doses originally scheduled for delivery in the summer will now be delivered in September and during the autumn and winter period 2022, when Member States will more likely need additional stocks of vaccines.

Poland and Slovakia have been connected by a new pipeline that will allow for greater diversification of natural gas supplies in Europe. The new pipeline, whose capacity will roughly cover Slovakia‘s annual gas consumption, provides an alternative to supplies of raw materials from Russia. This opened up a new route for the import of Norwegian gas to Slovakia, and the country also gained access to supplies of liquefied natural gas (LNG) from Polish ports.

Economy

In the second quarter of 2022, seasonally adjusted GDP increased by 0.6% in the EU, compared with the previous quarter. In the first quarter of 2022, GDP had grown by 0.6% in the EU. Compared with the same quarter of the previous year, seasonally adjusted GDP increased by 4.0% in the EU in the second quarter of 2022.

The eurozone's inflation rate broke another record in August. The annual growth rate of consumer prices accelerated to 9.1% from 8.9% in July. EU annual inflation was 9.8% in July 2022, up from 9.6% in June. A year earlier, the rate was 2.5%. High inflation is primarily due to the continued sharp rise in energy prices. According to the preliminary estimate, prices rose the most in Estonia, where inflation accelerated to 25.2 percent. Prices also rose by more than 20% in Lithuania and Latvia. Inflation was lowest in France, where it amounted to 6.5 percent.

In January to June 2022, extra-EU exports of goods rose to €1 237.3 bn (an increase of 17.9% compared with January-June 2021), and imports rose to €1,438.0 bn (an increase of 48.9% comcompared with January-June 2021). As a result, the EU recorded a deficit of €200.7 bn, compared with a surplus of €83.2 bn in January-June 2021. Intra-EU trade rose to €2 064.5 bn in January-June 2022, +24.3% compared with January-June 2021.

The EU unemployment rate was 6.0% in July 2022, down from 6.1% in June 2022 and from 6.9% in July 2021.

In June 2022 compared with May 2022, seasonally adjusted production in the construction sector decreased by 1.2% in the EU. In May 2022, production in construction increased by 0.1% in the EU. In June 2022 compared with June 2021, production in construction increased by 0.6% in the EU.

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Erste Bank Research Team

Erste Bank

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