Rhineland-Palatinate, Mainz: Fruits are sold at the weekly market.
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Germany’s inflation fell to 1.8% in July, data from Statistics Bureau Destatis showed Thursday.
Economists voted by Reuters expected inflation to fall to 1.9%. July reading was compared to the 2% printed material recorded in June, bringing German inflation rates in line with the European Central Bank’s goals.
The numbers are harmonized across the Eurozone to ensure comparability. Eurozone inflation data is scheduled for later this week, with reading forecasts of 1.9%.
The so-called core inflation, which removes food and energy costs, was 2.7% in July, and had not changed since the previous month, data shows. Meanwhile, the closely monitored service inflation print has been further eased from 3.3% in June to 3.1% in July.
Carsten Brzeski, global head of macros at ING, said in a memo on Thursday that Germany suggests that it is “currently going through a process of discovery.” Headline inflation is expected to remain below, but he added that it is close to the 2% mark.
Inflation numbers are closely monitored by economists and analysts in assessing the impact of US President Donald Trump’s tariff policy. Tariffs in several departments, as well as temporary reductions in retrograde obligations, have already taken effect in recent months.
Last week, the European Union and the US signed a contract that includes EU goods that were hit by a 15% tariff. Taxation is widely expected to affect US prices, but it is not clear whether and how inflation elsewhere could be affected.
“We still don’t know how European and US companies will respond to US tariffs. In one scenario, we can see eurozone prices falling due to US overqualification and lower sales, but globally operated companies may actually try to raise prices in Europe to narrow down US profits,” Bruzes said.
Inflation counts on Thursday come just after Dostatis announced a preliminary reading of Germany’s second quarter GDP on Wednesday. The economy shrunk slightly by 0.1% over the period, down from the 0.3% growth recorded in the first quarter.
