Italy: inflation down sharply in June, but ECB will not let up

According to preliminary estimates, in June 2023, the rate of change of the Italian consumer price index for the whole Italian community (NIC) was zero compared to the previous month and was +6.4 percent year-on-year (from +7.6 percent in May).

The slowdown in the annual inflation rate was mainly due to the prices of Unregulated Energy Goods (from +20.3% to +8.4%) and, to a lesser extent, of Processed Food, including alcohol (from +13.2% to +11.9%), Services Related to Transportation (from +5.6% to +3.8%), Non-Energy Industrial Goods (from +5.0% to +4.8%) and Recreational Services, including Repair and Personal Care (from +6.7% to +6.5%). At the opposite end of the spectrum, an upward contribution to the inflation rate came from prices of Unprocessed Food (from +8.8% to +9.6%).

Core inflation (all items net of energy and unprocessed food) stood at +5.6 percent (from +6.0 percent in May) and the index of items net of energy at +5.8 percent (from +6.2 percent in the previous month). This also indicates a reduction in wage dynamics.

For goods, the annual growth rate was +7.6% (from +9.3% in May), while for services the annual rate of change was +4.3% (from +4.6% in the previous month). As a result, the negative inflationary gap between Services and Goods narrowed in absolute value (from -4.7 percentage points in May to -3.3).

Food and unprocessed food prices increased by +0.6 percent month-on-month and 10.7 percent year-on-year (down from +11.2 percent in the previous month).

According to preliminary estimates, in June 2023, the rate of change of the Italian consumer price index for the whole Italian community (NIC) was zero compared to the previous month and +6.4 percent year-on-year (from +7.6 percent in May). Here is the related graph:

The exogenous origin of inflation in Europe is also made evident by this kind of news. Italy’s overall inflation comes in dry as energy prices fall. At the same time, the slowdown in “Core” inflation, net of eneegetic and fresh food prices, indicates how wage dynamics are falling. This is a sign of a growing economic slowdown, which would call for a slowdown, if not a permanent halt, to the European Central Bank’s policy of interest rate increases. Instead, Ms. Lagarde wants to continue with the rate increases, heedless, in her words, of growth. The welfare of European citizens takes a back seat to the ideological war on inflation, and the social and political consequences of this will be significant.