Euro zone inflation sees sharp rise in July

| August 16, 2010
Euro zone inflation sees sharp rise in July

Annual inflation in the 16-member euro zone has increased from 1.4% in June to 1.7% last month – a 20-month high.

On a monthly basis, prices fell 0.3% in July.

According to the EU statistics agency Eurostat, inflation was driven by higher fuel costs.

Meanwhile, across the 27 nations in the European Union, annual inflation grew to 2.1% last month, up from 1.9% in June.

On a monthly basis, prices in the European Union fell by 0.2%.

Finland, Greece, Spain, Portugal and Romania all raised their VAT rates last month – which also contributed to the rise in inflation.

Commenting, Astrid Schilo, Europe economist at HSBC, said: “The core inflation rate is slightly higher but with the VAT hikes that there have been in the euro zone, that’s not surprising.”

The inflation figures come just a few days after Eurostat revealed the euro zone economy grew by 1% in the April to June period – boosted by its largest economy – Germany.

Economic growth in the 16 nations that use the euro beat expectations, and followed growth of 0.2% in the first quarter and exceeded forecasts of 0.7%.

Meanwhile, the economy grew by 1.7% on an annual basis, according to Eurostat.

The growth was primarily from a strong performance in Germany, which saw a record 2.2% growth in the second quarter – the fastest quarterly growth in 20 years.

However, many analysts believe this is as good as it gets for the economy, since tough austerity measures in weaker economies threaten to weaken growth.

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