German inflation rises in July, economy grows more than expected in Q2

German inflation rose in July on higher energy prices due to the Iran conflict, threatening the long-awaited recovery of Europe's biggest economy.

Inflation accelerated to 2.8% year-on-year, in line with forecasts, preliminary data from the federal statistics office showed on Thursday.

Analysts polled by Reuters had forecast the EU-harmonised consumer price index to come in at 2.8% in July, compared with 2.4% the month before.

Energy inflation drove the increase, rising to 8.3% in July from 3.4% in the previous month, as the government’s tax rebate on fuel expired.

"The short-term trend in the inflation rate clearly depends heavily on further developments in the Middle East," said Commerzbank economist Ralph Solveen.