OECD inflation hits 4.2% due to energy and food prices

Food price inflation in the 38 countries that make up the OECD increased sharply to 3.1%, compared with 1.9% in June. Photo: Getty Images
Food price inflation in the 38 countries that make up the OECD increased sharply to 3.1%, compared with 1.9% in June. Photo: Getty Images

The 38-country Organisation for Economic Cooperation and Development (OECD) said year-on-year inflation increased to 4.2% in July 2021, compared with 4% in June.

Energy price inflation in the OECD area, which includes Australia, Canada, Chile, Japan, the US and many European countries, hit 17.4% in July, compared with 16.9% in the prior month. Food price inflation increased sharply to 3.1%, compared with 1.9% in June.

OECD annual inflation excluding food and energy was stable, at 3.1%.

Inflation in the euro area, at 2.2%, remained significantly lower when compared to the OECD area as a whole, as well as when compared just with the US, where inflation was at 5.4%.

Excluding food and energy, euro area inflation actually decreased to 0.7%, compared with 0.9% in June.

Chart: OECD
Chart: OECD

A flash estimate for the euro area by Eurostat, which is a body of the EU, points to a sharp increase in overall inflation in August.

In Germany, annual inflation increased sharply to 3.8%, from 2.3% in June, in part because of the temporary VAT decrease in July last year, the report said.

The opposite happened in Saudi Arabia, where inflation fell from 6.2% to just 0.4% due to the base effect from the VAT increase in July 2020.

In Canada, inflation ticked up slightly to 3.7%, from 3.1% and in Italy it went up from 1.3% to 1.9%.

Annual inflation was stable at 5.4% in the US after six consecutive months of increases while it slowed in the UK from 2.4% to 2.1%, as well as in France – from 1.56% to 1.2%.

The new Japanese 2020-base CPI shows continued overall price deflation in Japan in July (minus 0.3%) but at a slower pace than in June (minus 0.5%).

Annual inflation in the G20 area increased to 4.6% in July, compared with 4.3% in June.

Read more: Bank of England warns inflation will hit 10-year high of 4%

Among non-OECD G20 economies, annual inflation increased in Argentina to 51.8%, from 50.2%, in Brazil to 9%, from 8.3%, and in Indonesia to 1.5%, from 1.3%.

It was stable in the Russian Federation at 6.5%, and moderately in India (to 5.3%, from 5.6%), South Africa (to 4.7%, from 5.1%) and China (to 1.0%, from 1.1%).

Watch: What is inflation and why is it important?