According to Eurostat data, inflation in the Eurozone for October is 10.7% against 9.9% in September. The difference between the states is very large: in Lithuania – 22% (as well as in Latvia), in France – 7.1%, in Spain – 7.3%. In Romania, the latest data showed that inflation is approaching 16%.

The reasons for the price increase are mainly related to energy and food prices, Eurostat also shows.

Why does inflation differ in countries with the same currency?

There are several explanations. First, we have different consumption patterns. Spaniards consume in one way, Romanians in another. There are differences in the weight of the various goods and services that make up the shopping basket, as well as between the components of the shopping basket.

France: In the distribution of CPI weights, the category “miscellaneous goods and services” includes: fees for sex, bodyguards or astrologers

Alcohol, tobacco – 4.5%

Clothes, shoes – 3.7%

Food products, drinks – 15.8%

Housing, communal services – 15.3%

Health – 11.2%

Recreation, culture – 8.4%

Restaurants, hotels – 6.0%

Transport – 13.3%

GREAT BRITAIN: Britain’s spending structure is largely the same as Germany’s

Alcohol, tobacco – 3.5%

Clothes, shoes – 6.1%

Education – 3.0%

Food, drinks – 8.9%

Housing and communal services – 32.8%

Health – 2%

Restaurants, hotels – 7%

Italy – Low education costs

Along with fellow EU members France and Germany, education in Italy contributes very little to the inflation calculation: around 1% of the figure, which is a result of the free and low-cost, state-subsidized education available in all three countries.

Alcohol, tobacco – 3.6%

Clothes, shoes -6.5%

Education – 1.1%

Food, drinks – 19.3%

Housing and communal services – 11.2%

Restaurants, hotels – 8.3%

Transport – 12.7%

Germany. Housing costs account for approximately 32% of total costs

German consumers spend about 32% of their total spending on housing. In neighboring France, this figure is only 15%. In the EU, only Greece and Denmark have higher housing costs as a share of total household expenditure.

Alcohol, tobacco – 3.8%

Clothes, shoes – 4.5%

Education – 0.9%

Food, beverages – 9.7%

Housing, communal services – 32.5%

Transport – 13%

Japan – transport costs are the lowest

Among the rich countries in our set, changes in transportation costs affect Japan the least. Private car ownership there has been declining for years, partly because owning a car is expensive. Tolls and parking fees are high, so it’s no wonder that Japanese people are ditching their cars and relying on public transportation, thus reducing their overall transportation costs.

Alcohol, tobacco – 1.6%

Clothes, shoes – 4.4%

Education – 3.3%

Food, drinks – 19.3%

Housing and communal services – 27.6%

Transport – 8%

Canada: Almost 17% of Canadian household spending is on transportation

The distances are great, so it’s understandable.

Alcohol, tobacco – 2.5%

Clothes, shoes – 5.1%

Food products, drinks – 11.3%

Housing and communal services – 24.9%

Restaurants, hotels – 6.8%

Transport – 17.1%

However, differences in consumption patterns play only one of the roles of different inflation rates.

Differences in per capita income or labor productivity can also create a convergence effect known as the Balasa-Samuelson effect, explaining why countries with lower per capita income tend to have higher inflation rates compared to “richer” countries.

The difference in the level of inflation in the euro area is also partly related to the different rigidities in setting wages and prices, the paper published on cairn.info shows.

Another study by the ECB (European Central Bank) suggests that much of the variation in inflation may be due to differences in the wage-setting mechanism (including automatic indexation of wages to inflation in some countries) or in the wage-setting mechanism.

Differences in inflation may also result from varying degrees of exposure to exchange rate changes or external shocks. First, the degree of trade openness outside the EMU varies widely among eurozone member states: Ireland and the Netherlands are small economies that have solid trade with states outside the currency union, while France, Italy or Portugal are more modest.

Last but not least, we should talk about energy dependence, that is, about the share of energy imports in the national GDP.