Eurozone Energy Inflation To Drag On Household Consumption Throughout 2022

Summary

• The eurozone energy crisis lingers on as market gas prices remain elevated and Brent oil prices continue to trend higher.
• For the eurozone economy, this is bad news. The higher consumer and producer prices are resulting in negative real wage growth and squeezed margins, weighing on private consumption.
• Looking at futures markets, we expect energy inflation to drop over the course of 2022 after the peak seen in the fourth quarter of last year, even though this does not mean a reduction back to normal levels - far from it.

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By Bert Colijn, Carsten Brzeski

Energy inflation remains elevated for most of 2022, hurting real wages

From a consumer perspective, the jump in energy prices is a significant dent in purchasing power. Real wage growth in