Eurozone inflation rose to 2.9% in July, driven by energy prices

Eurozone inflation climbed to 2.9% in July, up from 2.8% in June, as energy prices surged 10% year-on-year, according to preliminary Eurostat data Source: infobae. The acceleration reversed a one-month slowdown and matched economists' forecasts Source: euronewses. Both outlets attributed the rebound to the renewed rise in energy costs following the Middle East conflict Source: euronewses.

The numbers

Core inflation, which strips out energy, fresh food, alcohol and tobacco, rose to 2.5% from 2.4%, while excluding only energy the rate held at 2.2% Source: infobae. Services inflation picked up to 3.3%, while fresh food inflation slowed to 2.5%, down six-tenths from June Source: infobae.

Country differences

Among the 21 eurozone countries, Lithuania registered the highest annual inflation at 5.6%, followed by Bulgaria (4.1%) and Cyprus (4.0%). Spain's 3.8% was the steepest among major euro economies—above France (2.4%), Germany (2.8%) and Italy (2.9%)—and its negative differential versus the eurozone average widened to 0.9 percentage points Source: infobae. Estonia posted the lowest rate at 2.0% Source: euronewses. Monthly swings were large: prices rose 1.5% month-on-month in the Netherlands but fell 1.4% in Greece Source: euronewses.

Outlook

The data came a day after the eurozone reported unexpectedly strong second-quarter GDP growth, reinforcing the view that the economy is more resilient than feared Source: euronewses. Pantheon Economics' Claus Vistesen said "we think headline inflation will remain just above 2.5%" and expects another 25-basis-point ECB rate hike before a pause. Ebury's Matthew Ryan cautioned that "the ongoing conflict and higher energy costs remain key risks to growth" for the net energy-importing bloc Source: euronewses.