Euro area inflation rose to 3.8 percent on the year in September, Eurostat confirmed on Friday, up from 3.2 percent in August and 2.2 percent a year earlier. Prices rose 0.6 percent on the month. The European Union rate was also 3.8 percent, up from 3.2 percent in August. The final figure is identical to the flash estimate published on October 2, which removes any hope that the first reading overstated the jump.
Energy did most of the work. Energy prices rose 18.9 percent on the year, up from 14.3 percent in August, and contributed 1.71 percentage points to the annual rate, more than any other component. Services contributed 1.52 percentage points, with services inflation at 3.2 percent on the year, up from 3.0 percent in August. Non-energy industrial goods contributed 0.29 percentage points and food, alcohol and tobacco 0.25 percentage points. Inflation excluding energy was 2.3 percent, and excluding energy, food, alcohol and tobacco it was 2.5 percent, both only slightly above August, which is the detail that separates a fuel shock from a broadening one.
The national spread stays wide. Romania recorded the highest annual rate at 6.5 percent, followed by Lithuania at 6.1 percent and Bulgaria at 5.6 percent, while Sweden was lowest at 1.0 percent and Hungary and Denmark were both at 2.1 percent. Among the large economies, Spain was at 5.0 percent, Italy at 4.2 percent, France at 3.4 percent and Germany at 3.3 percent. Annual inflation rose in 23 member states in September, was stable in three and fell in one.
For rates, the composition matters as much as the headline. A 3.8 percent print driven mainly by an 18.9 percent energy increase, with the ex-energy measures near 2.3 to 2.5 percent, gives the European Central Bank an argument to look through the spike, but services at 3.2 percent and rising gives it no room to ease. The next test is the October flash estimate, scheduled for November 4.