Euro Area Final Inflation Details Show Mixed Moves Across Underlying Measures

Economics Research 19 August 2026 | 6:43PM BST

Euro Area: Final Inflation Details Show Mixed Moves Across Underlying Measures

BOTTOM LINE: The final release of Euro area inflation for July showed headline Katya Vashkinskaya | inflation at 2.94%yoy, revised up from the flash reading of 2.92%yoy, and core Goldman Sachs International inflation at 2.48%yoy, unchanged from the flash print. Our summary indicator of sequential underlying inflation declined by another 1bp in July but still stands at a relatively elevated rate of 0.23%mom. The change in our sequential summary measure, however, reflects a sequential acceleration across most of the metrics we track, offset by a notable move down in the persistence-weighted measure. Updating our medium-term inflation infrastructure with the final details and another month of the underlying summary measure, our medium-term path is now slightly firmer for core goods but somewhat weaker for services, and continues to show core inflation at 2.5%yoy in 2026, peaking at 2.7%yoy in 2027Q1 before gradually declining to 2.0%yoy in 2028Q4. As for headline inflation, we continue to see the peak at 3.4%yoy in 2026Q4.

Euro Area Core HICP (July, Final): 2.48% vs. Flash 2.48%, last 2.36%, all %yoy.

Euro Area Headline HICP (July, Final): 2.94% vs. Flash 2.92%, last 2.75%, all %yoy.

1. The final release of Euro area inflation for July showed headline inflation at 2.94%yoy, revised up from the flash reading of 2.92%yoy, and core inflation at 2.48%yoy, unchanged from the flash print. Energy inflation was revised up 0.3pp to 10.3%yoy, and Food, Alcohol and Tobacco (FAT) inflation was revised down to 1.19%yoy. Using our seasonal adjustment methodology, aimed at closely replicating the ECB’s, and removing the Easter adjustment for the whole services basket, we estimate that seasonally adjusted sequential core inflation was 0.26%mom in July, up from 0.11%mom in the June reading, slightly below the ECB’s estimate of 0.30%mom. Within core inflation, we estimate that seasonally adjusted sequential core goods inflation went up to 0.22%mom in July, while sequential services inflation increased to 0.27%mom. The main positive contributions to the seasonally adjusted sequential pace in July came from medicines, personal transport equipment services, catering and rent, while transport insurance and transportation by rail provided a limited negative offset. The notable contribution from medicines was driven by Germany, where the component saw an almost 20%mom nsa increase in July, driven by a regulatory change in the reimbursement rules under the statutory health insurance, which increased co-payment for a range of medicines.

2. The services inflation contribution to headline inflation went up to 1.55pp in July.

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This could be attributed, in part, to hospitality-related services (restaurants and accommodation), miscellaneous services, insurance and financial services, and health and leisure services (recreational services) still contributing more than their historical averages (Exhibit 1). The contribution from NEIG went up to 0.23pp in July, with medicines alone contributing 8bp (up from 2bp in June). The contribution of FAT declined further to 0.23pp, its lowest value since June 2021, while the Energy contribution ticked back up to 0.94pp, close to its highest readings in more than 3 years. An increase in the contribution from the fuels component (0.67pp in July from 0.54pp in June) and personal transport hire services (0.04pp from 0.01pp in June) saw the transport contribution to headline inflation increasing to 0.96pp in July (compared to the peak of 1.12pp in May).

3. After trending up for some time, our summary indicator of sequential underlying inflation declined by another 1bp in July but still stands at a relatively elevated rate of 0.23%mom. The change in our sequential summary measure, however, reflects a sequential acceleration across most of the metrics we track, including supercore, HICPXX, domestic, and 25% trimmed…