Inflation in OECD area hits 7.7% in February

In just 12 months, year-on-year inflation in the OECD area has increased from 1.7% in February 2021 to 7.7% in February 2022.

This is the highest consumer price index increase since December 1990.

In January, OECD inflation was 7.2%.

While energy continued to boost inflation in a majority of OECD countries, food price inflation also showed a notable increase, the Organisation for Economic Co-operation and Development reported.

Taken in isolation, energy price inflation hit 26.6% during the month, whereas food price increased by 8.6%.

When food and energy are excluded, February’s core CPI was still 5.5% for the OECD area, up from 5.1% in January.

Inflation is highest in Turkey, where consumer prices increased by 48.7% in January and 54.4% in February. Without Turkey, OECD inflation was 6.3% year-on-year.

Among G7 countries, core inflation – excluding food and energy – was the main driver of overall inflation in Canada, Germany, the United Kingdom and the United States, while energy was the main contributor to inflation in France and Italy.

February’s monthly inflation among G7 countries was highest in Italy and France (0.9% and 0.8% respectively) and lowest in Germany (0.2%)

In the US, year-on-year inflation, at 7.9%, reached its highest rate since January 1982.

There, higher inflation could curb consumer spending to such an extent that the economy could fall into a recession, former Federal Reserve governor Lawrence Lindsey warned this week. Lindsey fears that monthly cost increases of 1% or more would lead to a shock that makes an economic downturn inevitable.

Currently inflation is costing US households an extra $296 per month, an analysis by Moody’s analytics has found.

The same dynamics play out in the rest of the world, where energy and food insecurity also come into play.

Given the supply shock from the war in Ukraine, further inflationary pressure is expected this year.

February’s data largely expresses the inflationary conditions before Russia invaded Ukraine, which has pushed up prices even more.

US inflation in March is forecast to exceed 8%. The US Bureau of Labor Statistics will release the figures on 12 April.