Inflation in Italy Still Exceeds Eurozone Level

In May, the Italian consumer price index stood at 7.6 percent year-on-year, while the annualized inflation rate in the 20-nation eurozone was 6.1 percent.

The last time prices rose at a higher rate in the eurozone than in Italy was in September 2022, when the rates were 9.9 percent and 8.9 percent, respectively.

The Central Reserve Bank of Italy predicts a 6.1 percent inflation for 2023, while the European Central Bank (ECB) expects a 5.4-percent rate for the eurozone.

Economists have noted that Italy is particularly prone to inflationary pressure because of its dependence on international trade and a lack of sufficient domestic energy production.

Inflation across Europe shot higher last year due to the economic effects of the conflict between Russia and Ukraine, including frequent halts of Russian gas supplies to Europe. Before the start of the conflict, Italy was Russia's second largest European natural gas customer, behind only Germany.

While global energy prices started to decrease from record high levels late last year, Italian energy giant Eni said Friday that retail energy prices in Italy were on the rise again, according to a survey of gasoline and diesel fuel resellers.

This trend has had a negative impact on Italian trade, thus contributing to higher prices.

ISTAT also said that in April, Italian exports declined by 1.7 percent year-on-year, while imports grew by 5.3 percent over the same period, reflecting higher prices for raw materials, intermediate goods, and finished products. The decline in exports was similar vis a vis both European trading partners (down 1.5 percent) and those outside the European Union (down 2.0 percent).

For the three-month period ending in April, both exports and imports were lower, by 2.2 percent and 6.5 percent, respectively, ISTAT said

Despite these trends, estimates for Italy and the European Union (EU) indicate that the growth in the inflation rate in Italy would likely dip below levels for the eurozone starting next year. Italy's central bank predicts that prices will be 2.3 percent above 2023 levels next year, decreasing further to an annualized 2.0 percent rate in 2025. Over the same period, the ECB predicts eurozone inflation to be 3.0 percent in 2024 and 2.2 percent the following year.

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