Euro Area: Inflation rises to new series high in July amid faster price increases for food and services
Harmonized inflation jumped to 8.9% in July from June’s 8.6% reading, moving further above the European Central Bank’s target rate of 2.0% and marking the highest print in the series. July’s result was due to faster increases in the prices of food, alcohol and tobacco, non-energy industrial goods and services. On the other hand, prices for energy increased at a slower pace.
On a monthly basis, harmonized consumer prices rose 0.1% in July, below June’s 0.9%. The annual rate of core inflation, which excludes volatile energy and unprocessed foods prices, rose to 5.0% in July from June’s 4.6%—also marking the highest print since records began.
Commenting on the release, Bert Colijn, senior economist at ING, noted:
“Even though GDP growth was still slightly positive in the second quarter, demand is already cooling significantly at this point. This confirms our view that despite rising core inflation, very little of this is demand-driven. High input costs are therefore likely to be the main driver behind the rapidly rising consumer prices with some service sectors like tourism perhaps being the exception.”