LGT Navigator

Inflation in Europe’s largest economies cooling rapidly

Consumer prices are slowing quickly in some of Europe’s major economies, according to data released Thursday. The Consumer Price Index for Germany increased in March by 7.4% year-on-year, down from 8.7% for February. The slowed rate of price increases in Europe’s largest economy was mostly due to energy prices, which only grew 3.5% on the year in March, compared with 19.1% in February. Food prices, however, continued to get more expensive more quickly and were 22.3% higher in March of 2023 than a year earlier.

Alessandro Fezzi, LGT
Reading time
5 minutes
© Shutterstock

Elsewhere in Europe inflation was also falling rapidly, with inflation in Spain coming down to 3.1% in March, from 6.0% in February, according to the euro area’s harmonised calculation method. The falling inflation rates on the continent could provide the European Central Bank with room to slow the pace of its interest rate hikes after it raised its key interest rate by 50 basis points earlier this month, faster than the Federal Reserve’s 25 basis point move last week. The Consumer Price Index for the full euro area is set to be released later Friday.

Equity markets reacted positively to the slowing inflation rates. In Europe, Germany’s DAX ended the day up 1.26% and France’s CAC 40 finished up 1.06%. Sentiment on markets in New York also remained positive, even as fourth-quarter year-on-year US gross domestic product was confirmed in its final reading to be slower at 2.6% than in the previous quarter, which saw 3.2% year-on-year growth. Data released Thursday also showed new jobless claims in the US remained broadly flat at just under 200’000 last week, close to the previous week’s value. The Dow Jones Industrial gained 0.43% to finish the day at 32’859.03 points and the S&P 500 increased 0.57% to close at 4050.83 points. On the Nasdaq, the major tech indices finished the day with gains of almost 1%.

Markets in Asia followed the positive sentiment coming out of the USHong Kong’s Hang Seng Index was trading up 0.7%. In mainland China, the Shanghai Composite gained 0.29% and the Shenzhen Component was up 0.48%. Japan’s Nikkei increased nearly 1%.

Elsewhere in Europe on Thursday, Switzerland’s KOF Economic Barometer fell slightly in March and is back below its long-term average of 100. The indicator stood at 98.2 points in March, falling 0.7 points from its revised value for February of 98.9 points. The initial reading for February was 100 points, which corresponds to the index’s long-term average. The negative signals within the index came from the manufacturing, services and construction sectors, according to the KOF Swiss Economic Institute, which computes the Economic Barometer, an indicator of the current position of the Swiss business cycle.

Corporate news in focus: No major corporate news scheduled for Friday.

Economic data in focus: German unemployment in March (09:55 CET), Consumer Price Index for the euro area for March (11:00 CET), core PCE price index for February (14:30 CET), European Central Bank President Christine Lagarde speaks at an event with students in Florence, Italy (17:00 CET).

LGT helps you make informed investment decisions

All about global economic and market trends at a glance

You can also follow us on Facebook or LinkedIn – or visit Insights and discover interesting background articles. If you have questions, a consultant from the bank will be happy to help you.

Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi,
Source: LGT Bank (Switzerland) Ltd.

Contact us