The Euro Area’s inflation rate surged for the third consecutive month, reaching 2.4% in December 2024, marking the highest rate since July. According to preliminary estimates, this rise aligns with market expectations and represents a slight increase from the 2.2% recorded in November. The year-end inflation jump was anticipated, mainly due to base effects stemming from last year’s drop in energy prices.

Energy Prices Drive Inflation Rebound

One of the primary drivers behind the December Eurozone Inflation increase was a rebound in energy prices. After months of decline, energy prices rose by 0.1% in December, compared to a 2% decrease in November. This marked the first positive energy price growth since July, signaling a significant shift in the inflationary trend. Additionally, inflation in the services sector saw a slight uptick, reaching 4% from 3.9% in November, contributing further to the overall increase.

Steady and Easing Inflation in Key Sectors

While energy and services inflation accelerated, other sectors showed a mixed trend. Inflation for food, alcohol, and tobacco remained steady at 2.7%, reflecting stability in these essential goods. Meanwhile, non-energy industrial goods experienced a slight easing in inflation, dropping from 0.6% in November to 0.5% in December. These trends indicate that the inflationary pressures are concentrated in specific sectors, particularly energy and services.

Read More: Euro Area Manufacturing PMI

Inflation Trends in Major Eurozone Economies

Inflation varied across the Eurozone’s largest economies. In Germany, the inflation rate climbed to 2.8% from 2.4%, and France saw an increase to 1.8% from 1.7%. Spain also experienced a rise, with inflation reaching 2.8%, up from 2.4%. However, Italy witnessed a slight decline, with inflation dropping to 1.4% from 1.5%. Core inflation, which excludes volatile items like energy, food, alcohol, and tobacco, remained steady at 2.7%. The European Central Bank (ECB) remains optimistic that inflation will return to its 2% target by the end of the year.