Prices rise as economy bounces back from virus hit
Consumer prices in Luxembourg rose at the highest rate among the countries of the euro area for the third month running, the EU statistics agency said on Tuesday, as Europe slowly came out of lockdown and got back to business.
Prices in the Grand Duchy for food and other products like fuel and services rose by an annual 4% in May, Luxembourg-based Eurostat reported. That was double the 2% increase across the euro-zone.
Inflation is seeing spikes across the globe as the end of lockdowns bolsters demand amid widespread material shortages and supply-chain disruptions.
Luxembourg also saw the highest price increases in March and April among all 19 countries using the euro as their single currency, the agency said.
The euro-zone's May inflation number was the highest in more than two years and was larger than economists predicted.
Energy prices had the highest impact, rising by an estimated 13% in May across the euro-zone, Eurostat said. Luxembourg's statistics agency Statec has also blamed rising oil prices for the inflation bounce this spring.
The European Central Bank has stressed that such price increases will likely be transitory, and that it is still premature to talk about unwinding monetary support, even if inflation is now at the level policy makers aim to achieve over the medium term. The central bank is due to present revised economic projections on June 10.
Luxembourg's economy grew 4.9% in the first three months of this year compared to the same period last year, Statec said on Monday. The country is on track to quickly recover the economic losses it suffered from the global Covid-19 outbreak with the third-fastest recovery in the European Union, the OECD forecast on Monday.
Luxembourg's economy had contracted just 1.3% in 2020, partially because its crucial financial industry could largely continue to function as normal while staff worked from home. Luxembourg's resilient job market, which saw unemployment drop to 6.1% in April from 6.9% a year before, is confirming the positive trend. Europe's broader labour market has also started to show signs of improvement. Euro-area unemployment unexpectedly dropped to 8% in April, Eurostat said in a separate report on Tuesday.
At the same time, German companies made less use of the furlough program that helped millions of workers hang on to their jobs during the pandemic as the country's joblessness continued to decline in May.
(Additional reporting by Bloomberg news agency)