But this is not the full story. Positive demand shocks – related to the strong pick-up in demand following the relaxation of COVID-19 restrictions – have also been at play. To me, two main types of evidence point to an important role that demand shocks have played so far. First, for some time now, inflationary pressures have been increasingly broad-based.
The contributions to headline inflation of non-energy industrial goods- and services inflation have steadily increased in recent months (see Figure 1). Note that services, which are not directly affected by higher commodity prices and disrupted production chains, account for 42% of the euro area HICP.