Annual consumer inflation in the eurozone rose to 2.9% in July, up from 2.8% in June, according to a flash estimate released by Eurostat. The 2.9% rate for July was in line with expectations from economists. {
Annual eurozone consumer inflation in July
Energy prices in the eurozone recorded a 10% annual increase in July, following an 8.5% rise in June. It has been reported that renewed conflict in the Middle East drove these higher energy costs. On a monthly basis, consumer prices in the eurozone rose an estimated 0.2% in July. {
Core inflation, which excludes energy, food, alcohol, and tobacco, increased to 2.5% from 2.4%. Services inflation rose to 3.3% in July from 3.2% in June, while inflation for non-energy industrial goods increased to 0.9% from 0.7%. Inflation for food, alcohol, and tobacco slowed to a 1.2% year-on-year increase in July, down from 1.5% in June. {
Regional inflation trends
Inflation rates varied across the eurozone in July. Lithuania recorded the highest rate at 5.6%, followed by Bulgaria at 4.1%, Cyprus at 4.0%, Spain at 3.8%, and Croatia at 3.6%. In Germany, inflation accelerated to 2.8%, while Italy's rate matched the eurozone average at 2.9%. Austria and Finland both reported 2.6%, Latvia reported 2.5%, and France reported 2.4%. Malta recorded 2.1%, and Estonia reported the lowest annual inflation rate at 2.0%. {
Monthly price movements showed significant divergence. The Netherlands recorded the sharpest monthly increase, with prices rising 1.5% from June, while Greece recorded the sharpest monthly fall at -1.4%. {
Market and Central Bank outlook
Following the inflation figures, the euro strengthened modestly against the US dollar to 1.1520.
The European Central Bank (ECB) aims to reach a long-term inflation target of 2% in the eurozone. Pantheon Economics expects the ECB to deliver another 25-basis-point rate hike before pausing. Claus Vistesen, an economist at Pantheon Economics, stated, 'We think headline inflation will remain sticky at just above 2.5% for the Eurozone.' {
Matthew Ryan, head of market strategy at Ebury, stated, 'The ongoing conflict and a spike in energy costs remain key risks to growth, given that the Eurozone is a net importer of energy.' Additionally, eurozone GDP unexpectedly accelerated in the second quarter. {