According to preliminary data released Tuesday, inflation across euro zone dipped to 2.9% which is a two year low down from 4.3% the previous month and below a consensus estimate of 3.1% from a Reuters poll of economists. Excluding volatile food and energy prices, core inflation dipped to 4.2% year-on-year in October to compared 4.5% in September.

According to European Union statistics agency Eurostat “Food, alcohol and tobacco is slated to have the highest inflation rate in October (7.5% compared to 8.8% in September), followed by services (4.6%, compared with 4.7% in September), non-energy industrial goods (3.5%, compared with 4.1% in September) and energy (-11.1%, compared with -4.6% in September).” On Tuesday, ECB also issued a statement that the euro-zone economy is slated to contract by 0.1% in the third quarter, below consensus estimates for GDP to be unchanged from the previous quarter.

The euro-zone economy is slated to grow by just 1% in 2024 and 1.5% in 2025. Germany, the growth engine of Europe recorded a 0.1% quarterly decline in GDP for the third quarter. The economy shrank by 0.8% on a price-adjusted basis from the same period last year.

Across, the 20-country currency bloc both the growth and inflation pictures remain highly differing. Latvia recorded the highest quarterly growth in the third quarter at 0.6%, followed by Belgium and Spain at 0.5% and 0.3%, respectively. Ireland posted the highest quarterly decline at 1.8%, followed by Austria at 0.6%.

Consumer Price Index stood at 10.6% in October 2022. Despite upside risks due to the ongoing Israel-Hamas War, the European Central Bank responded with a run of 10 consecutive interest hikes that took its key rate to a record high of 4%. The ECB Governing Council reiterated that the inflation is still expected to stay high as domestic pressures remain high and there is a decline in consumer prices.