Eurozone inflation hits 3% as growth nearly stalls

Eurozone inflation rose to 3% in April, a 0.4 percentage point increase from March and the highest year-on-year rise in the cost of living since September 2023, according to preliminary Eurostat data. The acceleration was primarily driven by energy prices, which surged 10.9% year-on-year compared to a 5.1% increase in March. Meanwhile, the European economy nearly stagnated in the first quarter of 2026, growing only 0.1%, half the rate recorded at the end of 2025, amid mounting concerns over the Middle Eastern conflict driving up energy costs. The data has raised concerns at the European Central Bank, which held its Governing Council meeting Thursday with inflation rising and economic growth slowing. The ECB's latest macroeconomic projections forecast headline inflation to average 2.6% in 2026, 2% in 2027, and 2.1% in 2028, while core inflation is expected to average 2.3% in 2026, 2.2% in 2027, and 2.1% in 2028. The underlying inflation rate, excluding volatile food and energy prices, actually decelerated by 0.1 percentage points to 2.2% in April. Among eurozone members, Finland recorded the lowest inflation at 2.3%, followed by Malta at 2.4%, while the Netherlands and France both stood at 2.5%. Bulgaria recorded the highest rate at 6.2%, followed by Croatia at 5.4% and Luxembourg at 5.2%. Spain posted a harmonized inflation rate of 3.5%, the highest among major eurozone economies, compared to 2.9% in both Germany and Italy. The economic slowdown appears to be worsening, with the European Commission's economic confidence indicator declining for the third consecutive month. Analysts at ING Research warned that households are likely to increase savings given rising unemployment expectations, which will weigh on consumption and likely weaken growth in the second quarter. Brussels estimates the energy conflict costs Europe approximately 500 million euros per day, a burden reflected in the sharp contrast between first-quarter growth of 0.8% in 2025 and the 0.1% recorded in 2026. Spain, meanwhile, showed relative resilience with quarterly GDP growth of 0.6% in the first quarter.