Flash estimate: Inflation fell to 2.7 percent in July

According to a flash estimate from Statistics Austria, inflation fell to 2.7 percent in July compared to the same month last year. In June, inflation was still at 3.2 percent year-on-year. The price increase was dampened by lower food prices. Since the beginning of July, the VAT reduction introduced by the government has been affecting some staple foods. Services , on the other hand, remained the largest driver of inflation.In July, prices for food, tobacco and alcohol fell by 0.1 percent, after rising by 1.5 percent year-on-year in June. “The reduction in VAT on basic foods from 10 percent to 4.9 percent from July 1, 2026 is likely to have contributed significantly to the slight price decline,” said Statistics Austria General Director Manuela Lenk, according to Friday’s broadcast.

Prices for industrial goods also rose less sharply than in the previous month, at 0.8 percent (June: plus 1.1 percent). The biggest inflation driver, however, was services; at 4.4 percent, inflation in this segment remained as strong as in June. Energy cost 5.7 percent more, after plus 5.4 percent in June. Especially in the second half of July, fuel and heating oil became significantly more expensive again after the war between the USA and Iran flared up again.

Government pleased, ÖGB and VCÖ criticize fuel price brake

The governing parties SPÖ and ÖVP naturally reacted with delight to the figures and the dampening effects of the VAT cut on food prices. However, the governor of the Oesterreichische Nationalbank (OeNB), Martin Kocher, also referred to the rise in prices for services. In addition, the geopolitical situation remains volatile and could quickly change energy prices and thus the inflation outlook.

The ÖGB also reacted more cautiously and pointed to continued high price pressure from fuel and heating oil prices. This is a massive burden for commuters and families, for whom switching to public transport is often not a realistic option.

The ÖGB also criticizes the extension of the fuel price brake announced on Thursday without a margin limit. “It is incomprehensible why an effective instrument for limiting margins has been weakened and is now no longer used at all,” says Angela Pfister, head of the Economics Department at the ÖGB.

VCÖ: Targeted package of measures is missing

The Austrian Transport Club (VCÖ) is also skeptical about the fuel price cap, but sees the solution as a reduction in consumption. “A targeted package of measures that reduces fuel consumption and the dependence on oil in transport is still missing,” said VCÖ expert Michael Schwendinger, according to the broadcast.

The association is calling for a package of measures aimed, among other things, at switching to public transport, expanding the cycling infrastructure, electrifying vehicle fleets and speed limits.