Annual inflation in Austria continued to rise in August and reached 3.2%, which was the highest rate since December 2011. The main price drivers were the sharply rising fuel and energy prices.
This was could be especially felt at the petrol pumps – since August 2020, diesel prices rose by a fifth, and premium petrol prices increased by a quarter. Heating oil was 30% more expensive, and profiled wood prices rose by over 50%, said Statistics Austria on Friday.
Prices for food and alcoholic beverages also increased moderately. The daily shopping basket cost 2.2% more, and the weekly shopping basket rose considerably, thanks to the fuel price increase, reaching 6.5%.
Aftershocks of the Pandemic
Partly, these price rises are a statistical effect – prices of many raw materials plunged last year when countries entered the first lockdowns in spring 2020, with economic activity collapsing around the world. Benchmark prices for a barrel of oil even briefly dipped into negative territory last year, in a historic first, as deposits flowed over. With the world economy roaring back this year, many prices have spiked in recent months.
The inflation rate in the eurozone fell to 0.3% in the year 2020, a far cry from its goal of stabilizing inflation at around 2% per year. In Austria, inflation fell to 1.4% last year. This year, the European Central Bank (ECB) forecasts inflation of 2.2% in the eurozone and 2.4% in Austria.
While inflation has staged a comeback all around the world, it is mainly the US where current inflation rates are significantly above target. There, monthly inflation rates above 5% were recorded. Massive fiscal stimulus, the reopening and supply chain delays and bottlenecks all contribute to this development.
Will It Stay or Will It Go Now?
This has sparked a debate on whether inflation is transitory – i.e. will normalize again after this year – or permanent – i.e. the harbinger of permanently higher inflation rates. With inflation in the EU having been subdued for well over a decade, the debate in Europe is more muted, with a stronger focus on workers’ wages and growth rates in countries hard hit by the pandemic.
The upcoming autumn wage negotiations in Austria and across the EU will show whether workers can claim back and improve on their purchasing power. Austrian metallers’ union representative Rainer Wimmer already announced that he wants to “make a rustle” in the upcoming metaller wage negotiations that set the pace for all other ones in Austria’s system of collective bargaining.
Reported in cooperation with the Austrian Press Agency / APA.