Inflation differentials in the euro area widened in 2022 to historically high levels following a surge in energy and other commodity prices. This column shows that the impact of a common shock can explain around half of the increase in headline inflation in 2022. The estimated responses to the common factor increase with energy intensity and decline with the share of services in gross value added. The common factor is also found to be more prominent in 2020-22 than in previous periods. The remainder of inflation developments can be explained by inflation persistence, along with more local and crisis-related factors. ... (full story)