- Energy prices fell by 1.7% year-on-year in July, slightly improving from a 2.1% decline in June.
- Food prices increased by 1.3% year-on-year, up from 1.1% in June.
- Excluding food and energy, the annual inflation rate stood at 2.9%.
- Goods prices rose by 0.9% year-on-year, while consumer goods prices increased 1.1%.
- Services prices were up 3.9% year-on-year, with net rents rising by 2.2%.
Implications for the German Economy and ECB Rate Decisions
The inflation numbers for July will challenge investor expectations of multiple 2024 ECB rate cuts. Services sector inflation sits significantly above the ECB’s 2% target. Conversely, German goods prices emphasized the weak demand environment affecting Germany’s manufacturing sector.
The rising risk of a German economic recession is unlikely to pressure the ECB into cutting…
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