Inflation and Trade Deficits in the European Union

Strategic Insights -

Inflation in the European Union has risen to 3.4 per cent in January, marking a slight increase from the previous month's rate of 3.3 per cent. However, this rate remains within the recent range of fluctuations between 3.2 and 3.6 per cent. Meanwhile, Britain's trade deficit with non-EU countries has widened to $1.12 billion, prompting economists to express concerns about future balance-of-payments problems. The accumulation of deficits is being closely monitored, particularly in the context of slowing export volume growth and increasing imports.

Key Takeaways:

  • The annual rate of inflation in the European Union has risen to 3.4 per cent in January, up from 3.3 per cent in December.
  • The inflation rate remains within the recent range of fluctuations between 3.2 and 3.6 per cent.
  • Seven EU members - Belgium, Britain, Denmark, France, Ireland, Luxembourg, and the Netherlands - have met the inflation criterion in Maastricht Treaty provisions.
  • Britain's visible trade gap with non-EU countries has widened to $1.12 billion in January from $994 million in December.
  • The Central Statistical Office notes that the monthly figures for EU trade are lagging behind due to new data-gathering procedures.
  • Economists are concerned about the accumulation of deficits that could lead to balance-of-payments problems in the future.
  • Exports excluding oil and erratic items such as aircraft and gems fell 0.5 per cent in the three months to January.
  • Imports rose 3.5 per cent during the same period.

Statistics:

  • Inflation rate in the European Union: 3.4 per cent (January), 3.3 per cent (December)
  • Trade deficit with non-EU countries: $1.12 billion (January), $994 million (December)
  • Fluctuation range: 3.2-3.6 per cent
  • Export volume growth: 0.5 per cent decline in three months to January
  • Import growth: 3.5 per cent increase in three months to January
  • Number of EU members meeting inflation criterion: 7 (Belgium, Britain, Denmark, France, Ireland, Luxembourg, Netherlands)

Sources:

  • European Commission's statistics office, Eurostat
  • Reuters
  • Central Statistical Office