Slowing inflation in the Eurozone increases the pressure on the ECB for new stimulus

Eurozone inflation turned out to be weaker in July than previously read, which is another factor that has increased pressure on the European Central Bank to add new stimulus in September. According to Eurostat, the revised July figures show a fall in consumer prices growth to 1% from 1.1% in the previous reading on July 31.

This is also a slowdown on the 1.3% estimated in June reading. By comparison, inflation in the single currency unit was 2.2% a year earlier.

For the European Union as a whole, consumer price increases were up 1.4% in July. This is again a decline from the reported 1.6% in June. A year earlier, just like in the Eurozone, inflation was 2.2%.

The lowest annual inflation was recorded in Portugal (-0.7%), Cyprus (0.1%) and Italy (0.3%). At the opposite side are Romania (4.1%), Hungary (3.3%), as well as Latvia and Slovakia (3% each). Compared to June, annual inflation slows down in 15 Member States, remains stable in two and accelerates in 11.

In July, the biggest contribution to annual inflation in the Eurozone came from the services sector (+0.53 percentage points), followed by food, alcoholic beverages and tobacco (+0.37 percentage points), non-energy industrial goods (+0, 08 percentage points) and energy (+0.05 percentage points).

The data is another signal, in addition to those of the last few weeks, that new measures may be needed to stimulate the Eurozone economic growth. Concerns about the global economic slowdown have deepened since it became clear last week that the German economy contracted in the second quarter and growth in the single currency unit was only 0.2%.