Inflation ticks up after Euro zone economy posts record slump in second quarter

BRUSSELS – The deepest contraction on record in the second quarter was recorded by the euro zone\’s economy, preliminary estimates showed on Friday, while the bloc\’s inflation surprisingly ticked up in July.

Gross domestic product in the 19-country currency bloc shrank by 12.1% from the previous quarter in the months from April to June, the European Union\’s statistics office Eurostat said in its flash estimates.

The deepest GDP drop since time series started in 1995 matched with COVID-induced lockdowns that began to ease in many euro zone countries only from May.

The contraction was slightly more noticeable than market expectations of a 12.0% fall, and happened after the 3.6% GDP drop noted in the first quarter of the year.

Inflation continued instead its upward trend, resisting expectations of a slowdown, associating with the European Central Bank\’s expectation that a negative headline reading may be avoided.

Consumer prices in the bloc rose 0.4% on an annual basis in July from 0.3% in June and 0.1% in May, is what Eurostat said. A 0.2% increase in July was forecasted by Economists polled by Reuters.

Underlying price pressure also speeded. Inflation rose by 1.3% from 1.1% in June, Eurostat\’s flash estimates showed, excluding volatile food and energy prices, a main measure watched by the ECB.

An even narrower gauge, which also dismisses alcohol and tobacco, soared to 1.2% from 0.8% in June.

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