Euro zone economy shows resilience as second-quarter GDP beats expectation, inflation slips

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Euro zone inflation fell in July, and new growth figures showed economic activity picking up in the second quarter of this year — but economists still fear a recession could be in the cards. Headline inflation in the euro area was 5.3% in July, according to preliminary data released Monday, lower than the 5.5% registered in June. This remains well above the European Central Bank's 2% target for the bloc. Core inflation — which excludes volatile food and energy prices — remained unchanged at 5.5% in July, which Andrew Kenningham, chief Europe economist at Capital Economics, said would be a "disappointment for policymakers." The euro area has been battling high inflation for the past year, leading the ECB to undergo a full year of consecutive rate hikes in an effort to bring prices down. Last week, the central bank rose rates by a quarter percentage point once again, bringing its main interest rate to 3.75%. Initially, much of the price pressures in the euro area were coming from high energy costs, but in recent months food prices have contributed the most. This month, food, alcohol and tobacco once again drove inflation — prices rose by 10.8% in July, in a hike that was nevertheless lower than in previous months.