Euro Area: Inflation falls again in July

Euro Area Inflation July 2023

Euro Area: Inflation falls again in July

Harmonized inflation fell again in July, decreasing to 5.3% from June’s 5.5% reading, as expected by markets. It represents the lowest inflation since January 2022. As a result, inflation moved closer to the European Central Bank’s target rate of 2.0%.

July’s result was due to a sharper fall in prices for energy, as well as to softer increases in prices for non-energy industrial goods and food, alcohol and tobacco. On the flipside, prices for services increased at a faster pace. Meanwhile, the annual rate of core inflation—which excludes volatile energy and unprocessed foods prices—declined to 6.6% in July from June’s 6.8%.

On a monthly basis, harmonized consumer dipped 0.1% in July, swinging from June’s 0.3% increase

Commenting on the outlook, Bert Colijn, senior economist at ING, stated:

“Overall, the inflation picture looks positive for the coming months. Even though energy prices have been increasing recently, base effects will push energy inflation down further. Selling price expectations look encouraging for core inflation, especially for goods. Services inflation is set to trend higher for longer, but also slowing from here on.”

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