VIENNA, July 31 (Xinhua) -- Austria's annual inflation rate is expected to ease to 2.7 percent in July, down from 3.2 percent in June, according to a flash estimate released by Statistics Austria on Friday.

People visit the Belvedere Garden in Vienna, Austria, March 19, 2025. (File photo: Xinhua)

The statistical agency said the 0.5-percentage-point decline in inflation was driven in part by lower food prices. "The reduction in value-added tax (VAT) on basic foodstuffs from 10 percent to 4.9 percent, effective from July 1, 2026, is likely to have contributed significantly to this slight fall in prices," said Manuela Lenk, director general for statistics at Statistics Austria.

Prices for the category of food, tobacco and alcohol fell by 0.1 percent year-on-year in July, compared with a 1.5-percent increase recorded in June. Meanwhile, prices for manufactured goods rose by 0.8 percent year-on-year in July, slowing from the 1.1-percent increase recorded in June.

Price growth in the services sector, the largest contributor to inflation, remained unchanged at 4.4 percent from the previous month.

Energy prices, however, increased at a slightly faster pace, rising 5.7 percent year-on-year in July compared with 5.4 percent in June, as fuel and heating oil became significantly more expensive during the second half of the month, Statistics Austria said.