German Inflation Cools to 1.8% in July, Beating Expectations
Rhineland-Palatinate, Mainz: German inflation dipped to 1.8% in July, a more notable decrease than economists had predicted, according to data released Thursday by the statistics agency Destatis. This marks a notable slowdown from the 2% inflation rate recorded in June, which had aligned with the European Central Bank’s target.
The figures, harmonized for comparability across the euro zone, come ahead of the release of broader euro zone inflation data later this week, which is forecast to be 1.9%.
Core inflation, which excludes volatile food and energy prices, remained steady at 2.7% in July, unchanged from the previous month. However, inflation in the services sector showed a continued easing, falling to 3.1% in July from 3.3% in June.
carsten Brzeski,global head of macro at ING,commented that the latest data indicates Germany is “currently experiencing a process of disinflation.” He anticipates that headline inflation will likely remain close to, but below, the 2% mark.
These inflation figures are under close scrutiny as analysts assess the impact of U.S. President Donald Trump’s tariff policies. Recent months have seen the implementation of various sectoral tariffs and temporary reductions in reciprocal duties. An agreement reached last week between the European Union and the U.S.includes a 15% tariff on EU goods. While these levies are expected to affect U.S. prices, thier impact on inflation elsewhere remains less clear.
“It remains to be seen how European and US companies will react to US tariffs,” brzeski noted.”While one scenario could see prices falling in the eurozone due to overcapacities and weaker sales in the US, globally operating companies might try to actually increase prices in Europe to offset profit squeezing in the US.”
The inflation data follows a preliminary reading from Destatis on Wednesday indicating that Germany’s economy experienced a slight contraction of 0.1% in the second quarter, a slowdown from the 0.3% growth observed in the first quarter.
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