Eurozone inflation rises in July as service sector pricing stays high

LONDON (ICIS)–Eurozone inflation in July is expected to rise from 2.5% to 2.6%, above market expectations, with services being the driving component, according to data from European Commission statistics body Eurostat.

Looking at the main components, services are expected to see the highest annual rate in July (4.0%, falling from 4.1% in June), followed by food, alcohol and tobacco (2.3%, also falling from 2.4% in June) and non-energy industrial goods (0.8%, compared with 0.7% in June) Energy holds the position of highest growth, growing to 1.3% from 0.2% in June.

Despite the higher than expected rate of inflation, the downward overall downward trajectory remains intact, according to analysts at banking group ING, but may not be at a pace to allow for further rate cuts in the immediate future.

“Survey data still suggests that the downward trend in inflation is likely to continue. And keep in mind that, at the current level, interest rates still imply restrictive monetary policy,” said ING chief economist for the eurozone Peter Vanden Houte.

The debate on whether The European Central Bank should or should not introduce a cut in September will only be finalised once another six weeks of remaining economic data is reviewed. The central bank’s monetary policy committee convenes on 12 September.

The eurozone inflation flash estimate is issued at the end of each reference month. The final figures for July are schedules to be released for 20th August 2024.