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Food market in Berlin: Costs for food remain high

Photo: David Gannon / AFP

Inflation in the euro area countries has weakened for the second month in a row. In July, year-on-year inflation was 5.3 percent, according to the statistics agency Eurostat on the basis of preliminary figures. In June, it was still at 20.5 percent in the 5 euro countries, and in May it was 6.1 percent. It is the lowest inflation rate since the beginning of 2022.

The main reason for the slowdown was apparently the falling energy prices. They fell by 6.1 percent after rising sharply last year. On the other hand, the costs of food, alcohol and tobacco remained high: they rose by 10.8 percent in July, after 11.6 percent in June.

Highest inflation in Slovakia

Core inflation – excluding the highly volatile prices of energy, food, alcohol and tobacco – stood at 5.5 percent in July. Core inflation is an important criterion for the European Central Bank, and its target is two percent.

In Germany, consumer prices rose by 6.2 percent in July, according to the Federal Statistical Office. Eurostat assumes 6.5 percent on the basis of a slightly different calculation. Inflation was lowest in July in Belgium at 1.6 percent. It was highest in Slovakia at 10.2 percent.

The economy is growing faster than expected

The falling inflation rate goes hand in hand with economic output that rose somewhat more than expected in the spring. In the second quarter, gross domestic product (GDP) in the euro area increased by 0.3 percent compared to the previous quarter, the statistics office said. Economists had expected growth of 0.2 percent on average.

In the first quarter, the economy was still stagnating. In the fourth quarter of 2022, it had even shrunk by 0.1 percent. However, the development showed significant differences in the large countries of the eurozone. For example, the economy grew by 0.5 percent in France and 0.4 percent in Spain. In Germany, on the other hand, it stagnated. The Italian economy contracted by 0.3 percent over the same period.