Q2 GDP Sees Surprise Strengths, CPI Soars to 8.9%

EUROZONE JUL CPI +0.1% M/M (FCST -0.1%); JUN +0.8% M/M

EUROZONE JUL CPI +8.9% Y/Y (FCST 8.7%); JUN +8.6% Y/Y

EUROZONE Q2 2022 FLASH GDP +0.7% Q/Q; Q1 +0.5%r Q/Q

• The aggregate euro area headline inflation surged a further 0.3pp to a fresh high of +8.9% y/y in the July flash.
• This follows decent upside surprises to German, French and Spanish HICP this morning, Only Italian HICP managed to edge down (by 0.1pp).
• Forecasts were beaten across the board by 0.2pp on the headline and month-on-month and by 0.1pp on the core print. Three countries (Estonia, Latvia and Lithuania) saw year-on-year rates over 20%.
• Core inflation excluding food and energy also saw a 0.3pp boost, reaching +4.0% y/y after a small 0.1pp deceleration in June. As such underlying inflation is at over double the ECB's target inflation rate.
• A small slowdown in energy prices was recorded at+39.7 % y/y in July, following +42.0% y/y in June, however this was cancelled out by a strong 0.8pp uptick to +9.8% y/y acceleration in food prices.
• Euro area GDP saw a solid 0.5bb beat of forecasts at +0.7% q/q in the Q2 flash estimate underscoring a robust end to H2 despite soaring commodity prices and deuteriation of economic outlooks and supply chains exasperated by the Ukraine war.
• As price pressures continue to soar across the Eurozone and regional GDP prints for Q2 remained robust, this data puts a 50bp hike very much on the table for the September meeting.