Italian inflation surges in October ahead of euro zone figures

Italian inflation surged to a new record high in October, data showed on Friday, underscoring the economic challenges facing new Prime Minister Giorgia Meloni and increasing the risk of a further rise in the euro zone as a whole.

Italy's EU-harmonised consumer price index (HICP) jumped a preliminary 12.8% year-on-year, the highest level since the series began in 1996, from 9.4% in September, statistics bureau ISTAT reported.

The data far outstripped expectations for a 9.9% rate in a Reuters survey.

Energy price inflation leapt to 73.2% from 44.5% the month before, ISTAT reported, while core inflation, net of energy and fresh food, climbed to 5.7% from 5.3%.

"Inflation at this level is one of the immense economic problems for the new government, which only has limited resources to tackle them because of the huge public debt," said Lorenzo Codogno, the head of LC Macro Advisors and a former chief economist at the Italian Treasury.

He said Meloni should direct government help to poor families rather than the general population, by directly paying a proportion of their energy bills and thus easing their financial burden and also reducing prices.

"Looking ahead, conditions don't seem to be there yet to call the inflation peak," ING bank said in a note to clients, citing pipeline pressures evident in producer price data for September.

"What we will likely see is more volatility in headline numbers over the next few months."

EURO ZONE DATA AWAITED

Energy driven, sky-high inflation around the euro zone led the European Central Bank to hike its deposit rate on Thursday for the third time since July, but prices now seem to be rising faster in Italy than in most of its euro zone neighbours.

Inflation in France jumped to 7.1% in October from 6.2% the month before, while in Spain it eased to 7.3% from 9.0%. German regional data pointed to a rise from September's 10.9% rate, against expectations for a stable reading.

Data for the 19-nation currency bloc will be released on Monday.

On Friday the ECB's Survey of Professional Forecasters, a key input in policy deliberations, showed euro zone inflation will be higher than feared for years to come and could stay above the bank's 2% target indefinitely.

The share of income Italians were able to save between March and August fell by 78% compared with the first two months of the year, research by online bank N26 showed, a much sharper drop than seen in Germany, France or Spain.

Meloni, sworn in on Saturday at the head of a right-wing coalition, faces a raft of problems for the euro zone's third largest economy which the Treasury says is probably now in recession.

Consumer morale plunged to a nine-year low this month, ISTAT reported on Thursday, as the surge in the cost of living erodes household savings.

Italy's new Economy Minister Giancarlo Giorgetti said on Thursday he hoped the ECB would take account of the slowing euro zone economy in its future policy decisions.

After Friday's "shocking" inflation release, the Italian government will likely feel compelled to speed up the launch of a new package of measures to help consumers cope, ING said.

ISTAT will release a flash estimate for third quarter gross domestic product on Monday, with analysts surveyed by Reuters expecting a flat reading compared with the previous three months.

(Editing by Toby Chopra)