Italy inflation surges to 5.4% in October as energy costs bite

In October, Italy experienced a sharp rise in inflation to 5.4%, significantly surpassing the European Central Bank's 2% target for the eurozone. The surge was primarily attributed to increased energy, food, and transport prices, according to the agency. Despite this, the eurozone economy expanded more than expected in the third quarter, displaying resilience amidst the ongoing Middle East conflict and escalating energy costs.

Economists noted that while the single currency area's growth held up well, there were concerns about potential stagflation - a combination of stagnant growth and high inflation. The EU's statistics agency reported that the euro area's GDP rose by 0.4% in the third quarter, slightly lower than the 0.6% growth predicted by economists surveyed by Bloomberg.

However, Ireland's exceptional 5.5% growth in the same period skewed the overall data, with economists suggesting the euro area's growth was around 0.2% excluding Ireland.

The eurozone economy seemed to have weathered the Middle East crisis, according to ING chief economist Bert Colijn. He mentioned that despite the worsening energy shock, the economy remained resilient, citing factors such as higher spending on defense, infrastructure, and the tech boom. Paolo Grignani, a senior economist at Oxford Economics, pointed out that the data painted a mixed picture for the eurozone, with stagflationary tendencies - strong GDP growth but upwardly surprising national inflation rates.

Eurozone inflation hit a three-year high of 3.8% in September, primarily driven by the US-Israel war on Iran, which led to a surge in energy prices. As Europe braces for winter, experts warned of additional challenges. Colijn cautioned that the steadily rising energy costs, including gas prices, would pose further growth challenges for the continent during the colder months.

The growth in the eurozone came despite France, the second-largest economy in the area, recording a quarterly GDP contraction of 0.1%, deepening concerns about its public finances and political tensions ahead of presidential elections next spring. France's economy had not grown at all in 2026, which added to growing concerns about the country's economic situation.

Meanwhile, Germany, Europe's largest economy, saw higher-than-expected growth of 0.2% in the July to September period, following a 0.3% expansion in the second quarter. Italy, however, reported no economic growth in the third quarter, while Spain maintained its growth rate at 0.6% GDP growth in the same period. As growth becomes increasingly uneven across countries, with Germany and Spain gaining momentum, France and Italy have slowed, according to Oxford Economics' Grignani.