Euro Area inflation saw a slight uptick in January 2025, rising to 2.5% from 2.4% the previous month, according to preliminary estimates.
Eurozone inflation up, driven by energy
This figure marginally surpassed market expectations of 2.4% and represents the highest inflation rate since July 2024. The primary driver behind this increase was a significant surge in energy costs, which climbed to 1.8% compared to a mere 0.1% in December. This resurgence in energy prices likely reflects ongoing geopolitical tensions and their impact on energy markets.
While energy costs fueled the overall inflation rise, other sectors presented a mixed picture. Inflation for non-energy industrial goods remained stable at 0.5%, suggesting some price stability in manufactured goods. However, price increases moderated in both the services sector, slowing slightly to 3.9% from 4.0%, and in the food, alcohol, and tobacco category, which saw inflation ease to 2.3% from 2.6%. This suggests that inflationary pressures may be easing somewhat in these areas.
Eurozone: core inflation holds steady
Crucially, core inflation, which excludes the volatile components of food and energy, held steady at 2.7% for the fifth consecutive month. This figure, while slightly above market predictions of 2.6%, marks the lowest level for core inflation since early 2022, indicating that underlying inflationary pressures, while persistent, are not escalating. The stability of core inflation, despite the energy price spike, offers a more nuanced view of the inflationary landscape in the Euro Area and suggests that the recent increase may be primarily attributable to the energy sector's volatility.
