Euro zone headline inflation came in below expectations in annual terms in July, but economists still expect the European Central Bank (ECB) to raise interest rates twice more this year.
European Union statistics office Eurostat said today that consumer prices rose 2.4 per cent year-on-year, slowing from 2.5 per cent in June. The reading also fell below its initial estimate of 2.5 per cent, which had shaped market forecasts.
Price rises in fuels for transport, gas, heating oil, district heating and oils and fats were the main drivers behind the overall increase, Eurostat said.
The ECB wants to keep headline inflation just below 2 per cent and has been raising interest rates since last December to stem pressure from record credit growth and oil prices. The last rise, to 3 per cent, came on August 3rd.
Month-on-month, consumer prices fell 0.1 per cent in July, pulled down by declines in clothes, shoes, vegetables, plants and flowers.
Energy prices were the only ones to increase in July against June, rising 1.4 per cent for a year-on-year gain of 9.5 per cent - a marked slowdown from the 11 per cent annual rise in June and 12.9 per cent in May.
Inflation without volatile energy and food prices, the measure the ECB calls core inflation, inched up to 1.6 per cent year-on-year from 1.5 per cent in June.
Eurostat also said industrial production in June eased 0.1 per cent month-on-month as expected by the markets, for a slightly higher than forecast year-on-year rise of 4.3 per cent.
While the monthly production slump was mainly a result of falling output of durable consumer goods, capital goods and non-durable consumer products, the annual rise was fuelled by a jump in intermediate and capital goods production.
Economists said the output data suggested Eurostat's estimate of second-quarter gross domestic product growth for the euro zone of 0.9 per cent quarter-on-quarter would not be revised down.
It also suggested that output momentum would hold in the third quarter.
Agencies