Eurozone inflation hits record 10.7% in 'Halloween nightmare' for the ECB

Hannelore Foerster

Consumer inflation in the eurozone bloc rose more than expected to an all-time high this month, preliminary figures out Monday showed.

October CPI rose 1.5% month-over-month to an annual rate of 10.7%, up from 9.9% and higher than the consensus of 10.2%. Core CPI rose to an annual rate of 5%.

The data "show inflation surged again in October and are a proper Halloween nightmare for the ECB," Claus Vistesen, chief eurozone economist at Pantheon Macro, wrote.

"Looking ahead, risks are now firmly tilted to the downside for energy inflation, due to the slump in gas prices and the shift in year-over-year basis effects, especially in oil," Vistesen said. "The counter-point, however, is that the lag with which this year’s leap in wholesale gas and electricity prices are feeding through to regulated prices indicate that further nasty surprises could still lie ahead."

In addition, Q3 rose just 0.2% quarter on quarter to an annual rate of 2.1%. Those are down from the 0.8% Q2 month-on-month rise and the 4.3% annual pace.

Business surveys "took another leg down in October, and point to GDP falling in Q4, and leading indicators point to the surveys dropping further over the coming months," Vistesen said. "We doubt activity will defy the business surveys again in Q4, or that the EZ economy will avoid entering a technical recession over the coming quarters, as higher interest rates discourage investment and still-high inflation leads consumers to tighten their belts over the winter."

The ECB hiked rates by 75 basis points last week, but the consensus was that language softened.