Europe’s Record Heat Puts Pressure on Prices and Growth

Record-breaking heat across Europe is beginning to affect not only daily life but also the economy. Analysts warn that extreme temperatures are putting pressure on food prices and supply chains and could weigh on economic growth.

One problem is exceptionally low water levels on the Rhine, one of Europe’s most important waterways. Some cargo services have been suspended, while others are operating with reduced loads, pushing up transport costs.

At the same time, heatwaves, droughts and wildfires are hitting agriculture. Investors warn that food-price pressures could be intensified further by the El Niño weather pattern. If energy prices rise again, central banks could face additional pressure in their fight against inflation.

A study by the European Central Bank and the University of Mannheim estimated that heatwaves, droughts and floods reduced Europe’s economic output by 0.3% last summer.

Record temperatures have also created winners. Retailers and manufacturers are reporting strong demand for fans and air-conditioning units. The European Commission estimates that the number of room air conditioners in the EU will rise from 57 million in 2020 to more than 100 million by 2030.

(Reuters, est)