Luxembourg consumer prices jumped in April

Luxembourg was among the countries worst-battered by price increases as inflation in the Grand Duchy and other euro-area countries climbed to a fresh all-time high, the EU's statistics agency said on Friday.

Consumer prices in the euro-zone were up 7.5% from a year earlier in April, Luxembourg-based Eurostat reported. Prices facing Luxembourg shoppers rose by an estimated 9%, the agency said.

Energy remains the key driver and was back in sharp focus this week as Russia halted natural gas supplies to Poland and Bulgaria -- threatening other European Union members with the same if they don’t pay for fuel in rubles.

A hand holds a petrol fuelling nozzel in the German city of Tübingen earlier this month © Photo credit: Franziska Kraufmann/dpa

European Central Bank officials have grown increasingly concerned that stubbornly persistent price pressures will lead to more permanent inflation above their 2% goal, signalling that an end to large-scale asset purchases and record-low interest rates may come in the summer.

But these decisions -- on the agenda for the ECB’s June 8-9 meeting -- are complicated by the extreme uncertainty to the outlook as the Ukraine war hurts confidence and raises fears of energy shortages.

Supply chains are also being squeezed by lockdowns in China, forcing companies like BMW AG and Robert Bosch GmbH to shut factories. The 19-nation euro economy grew 0.2% in the first quarter, and while many analysts still say a recession can be avoided, they see growth momentum -- along with inflation -- slowing in the second half of 2022.

ECB Vice President Luis de Guindos said on Thursday that price pressures are “very close” to peaking, though he warned they won’t fall below 4% this year.

In a separate report, Eurostat said that the total output of the 19 countries that use the euro currency grew by a weak 0.2% between January and April, down from 0.3% growth in the gross domestic product during the last quarter of 2021 and from 5.0% in the first three months of last year.

Luxembourg's government now expects the country's economy to grow by 1.4%, less than half of an earlier projection of 3.5% GDP growth this year due to the impact of the war in Ukraine, Finance Minister Yuriko Backes said on Wednesday while citing national statistics agency Statec.

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