Spain, Barcelona, Mercat de Sant Antoni Market, fresh fruit vendor display. (Photo by: Jeff Greenberg/Education Images/Universal Images Group via Getty Images)
Jeff Greenberg | Universal Images Group | Getty Images
Euro zone inflation fell in July, and new growth figures showed economic activity picking up in the second quarter of this year — bringing some positive news to the region.
Headline inflation in the euro area was 5.3% in July, according to preliminary data released Monday, lower than the 5.5% registered in June. However, it remains well above the European Central Bank’s 2% target for the 20-member bloc.
The euro area has been battling high inflation for the past year, leading the ECB to undergo a full year of consecutive rate hikes in an effort to bring prices down. Last week, the central bank rose rates by a quarter percentage point once again, bringing its main interest rate to 3.75%.
Initially, much of the price pressures in the euro area were coming from high energy costs, but in recent months food prices have contributed the most. This month, food, alcohol and tobacco once again drove inflation — prices rose by 10.8% in July, although this was lower than in previous months.
GDP beats expectations
The inflation figures come against a backdrop of previously moribund growth, with GDP (gross domestic product) stagnating in the first quarter of this year. However, a separate data release on Monday showed that growth accelerated in the second quarter, expanding by 0.3% — higher than the 0.2% expected by analysts polled by Reuters.
Both France and Spain’s economies proved relatively resilient in the second quarter, with the former posting a GDP rate of 0.5% and the latter expanding by 0.4%.
Germany, however, proved weaker over the same three-month period, failing to post any growth.
This is a breaking news story and it is being updated.
