Energy prices drive up inflation to +3.3% in August

Italy's inflation rate rose to 3.3% year-on-year in August 2026, according to preliminary estimates released by the National Institute of Statistics (Istat). This marks an increase from July’s 2.9% and reflects continued pressure from energy prices, which saw their annual growth accelerate sharply. Energy prices, both regulated and unregulated, rose by 17% compared to the previous year, up from 11.6% in July. The rise in inflation was driven primarily by increases in energy costs, which remain affected by international tensions. The monthly inflation rate stood at 0.5%, with the overall consumer price index showing a modest increase. However, this masked a more pronounced acceleration in energy prices. Regulated energy prices climbed by 18.8% annually, while unregulated ones surged by 16.9%. These figures underscore the ongoing impact of global energy market dynamics on domestic inflation. Meanwhile, other sectors showed signs of moderation. Prices for recreational, cultural, and personal care services slowed slightly from 3.0% to 2.6%, and transport-related services dropped from 1.6% to 0.9% annually. Core inflation, measured excluding both energy and fresh food, eased marginally to 1.5% from 1.6%. Similarly, inflation excluding just energy dipped to 1.7% from 1.8%. In contrast, goods prices accelerated, rising from 3.2% to 4.1% annually, while service prices decelerated to 2.4% from 2.7%. This widening gap between goods and services inflation highlights divergent trends within the economy. The overall price trend was influenced by several factors. Energy prices, both regulated and unregulated, increased significantly, contributing to the upward pressure on inflation. Transport services also saw a notable rise, adding 1.4 percentage points to the monthly change. Processed food prices rose by 0.4%, and durable goods prices increased by 0.3%. These elements combined to push the general inflation rate higher despite some easing in specific areas. The Harmonized Index of Consumer Prices (IPCA) recorded a 0.1% monthly increase, though this figure does not account for summer sales typically seen in retail, which can temporarily lower prices. On an annual basis, the IPCA rose to 3.2%, reflecting broader inflationary pressures across the economy. The so-called "shopping basket," representing essential items such as food, household goods, and personal care products, maintained its annual inflation rate at 1.0%. However, high-frequency purchased goods, those bought regularly, saw a sharper increase, rising from 3.4% to 4.3% annually. This suggests that everyday expenses are becoming increasingly burdensome for consumers. Meanwhile, Italy’s labor market remained largely stable in July, with employment numbers holding steady at 24.37 million. The stability in employment reflected mixed signals across different demographics. While men, permanent employees, self-employed individuals, and those aged 35–49 saw increases in employment, women, temporary workers, and other age groups experienced declines. The overall employment rate remained unchanged at 63.2%. Unemployment rates decreased slightly to 5.8%, down from 5.9%, although youth unemployment rose to 18.9%, indicating persistent challenges among younger job seekers. The number of inactive individuals, those neither working nor seeking work, also declined, primarily among men and those aged 35–49, while other groups saw little change or even slight increases. Looking back over the past year, employment has grown by 307,000 since July 2025, driven mainly by an increase in permanent employees and self-employed individuals, offsetting a decline in temporary workers. This long-term trend shows some resilience in the labor market despite ongoing economic uncertainties. Across Europe, similar inflationary pressures were observed. Germany’s inflation rate rose to 2.9% annually in August, up from 2.8% in July, according to preliminary data from the Federal Statistical Office. Although this figure fell short of expectations, it still indicated a broadening trend of rising prices throughout the Eurozone. Analysts anticipate that inflation in the region will reach 3.3% annually, marking the highest level since September 2023. In Italy, the expected increase to 3.4% would represent a similar peak. Energy markets have been a key driver of these developments. Crude oil prices have hovered around $90 per barrel, while European gas prices, measured against the TTF benchmark in Amsterdam, reached record highs above €70 per megawatt-hour. These elevated energy costs are likely to influence central bank decisions in the coming months. The European Central Bank is expected to raise interest rates again during its meeting on September 10, bringing the rate from 2.25% to 2.5%. This follows a period of tightening monetary policy aimed at curbing inflation. Similar considerations are being made by the U.S. Federal Reserve, with President Kevin Warsh describing inflation as “concerning” and signaling potential further action on interest rates unless there is clear evidence of convergence toward the 2% target.