In October, inflation rose to 11.9% in Italy, with a strong increase compared to + 8.9% the previous month. The continuous increase in consumer prices is driven by the energy component which once again confirms itself as the engine of the inflationary pressure of the last year. Any government intervention could increase the volatility of inflation numbers over the rest of the year.
The runaway inflation is mainly due to the increase in the energy component which increased to + 73% in October from + 44% in September, a sharp rise.
In addition to energy, the food component weighs heavily and is confirmed to be the other driver of inflation; in fact, in October it increased to + 13.1% from 11.4% in September, confirming the growth trend.
As Paolo Pizzoli, Senior Economist of Ing, comments, “it is interesting to note a growing gap between the inflation of goods which went from 12.5% in September to the current + 17.2% and the inflation of services (+3 , 7% from 3.9% in September), which seems to indicate that the reopening / tourism effect is actually fading “.
The weight of the energy component is confirmed by the contained increase in core inflation which in October stood at 5.3% from 5% in September.
In this sense, “core inflation remains a cause for concern, but its deceleration is an encouraging sign that will have to be assessed in the coming months”, observes Pizzoli, who continues, “it is possible that the context of deteriorating demand limits possibility of transition downstream of cost pressures ”. Moreover, this would also be confirmed “by the data on producer prices in September which indicate an increase in production inflation also in the non-energy component”.
Given that the conditions do not yet seem to exist to state that the peak of inflation has already been reached, Pizzoli expects volatile data in the coming months and the recent drops in gas prices could already be partially reflected in the November inflation data, leading to a slowdown. Furthermore, according to the economist, after the release of such a high inflation figure, the Italian government will probably feel compelled to accelerate on a new package of dedicated compensation measures. Finally, the Ing analyst predicts an average inflation of 8.1% in 2022 and updates the forecasts for 2023 to 6.3% on the basis of greater statistical inertia.