The harmonized inflation rate jumped to 8.9% in July from a June reading of 8.6%, moving further above the ECB’s target rate of 2.0%, and marking the highest reading in the series. The July result was due to rapid increases in the prices of food, alcohol, tobacco, and non-energy industrial goods and services. On the other hand, energy prices rose at a slower pace.
On a monthly basis, CPI rose 0.1% in July, down from 0.9% in June. The annual rate of core inflation, which excludes volatile energy and unprocessed food prices, rose to 5.0% in July from 4.6% in June – also the highest number since records began.
Commenting on the release, Bert Cullen, chief economist at ING noted:
“Although GDP growth was still fairly positive in the second quarter, demand is already declining significantly at this point. This confirms our view that despite higher core inflation, very little of this is due to demand. Thus, higher input costs are likely to be the main driver behind the rapid rise in consumer prices, and some service sectors such as tourism may be the exception.”
FocusEconomics panel members see inflation at 3.5% in 2022, unchanged from last month’s estimate, before dropping to 2.7% in 2023.