Food Prices are Holding Down Overall Inflation, Consumer Sentiment is Improving

The rise in crude oil prices caused by the war in Iran weighed on the domestic economy and halted the economic recovery. According to the WIFO Flash Estimate, GDP stagnated in the second quarter of 2026 compared with the previous quarter (in volume terms, seasonally and calendar-adjusted). Consumer demand from private households was also sluggish, according to the Weekly WIFO Economic Index – WWWI, this trend is likely to have continued in the first three weeks of July.

According to preliminary data, calendar-adjusted turnover in Austrian retail trade (excluding motor vehicles) was weak in June 2026 (value +1.8 percent, volume –0.3 percent year-on-year, preliminary figures) and lay below the average for the first half of the year.

Inflation fell to 2.8 percent in July 2026 (June 3.2 percent). The fall in prices for food and non-alcoholic beverages (–0.4 percent), largely due to the reduction in VAT on basic staple foods from 1 July 2026, contributed significantly to this.

Survey data from the WIFO-Konjunkturtest (business cycle survey) showed a slight improvement in July, although business sentiment remained predominantly pessimistic, partly due to uncertainties surrounding the war in Iran and crude oil price developments.

In the retail sector, too, the WIFO Business Climate Index has recently risen, thereby almost offsetting the pessimism of recent months. Both the assessment of the current situation and expectations for the coming months improved.

The confidence among domestic consumers also improved. Compared with April – the previous "low point" since the beginning of the war in Iran – the current net balance of optimistic and pessimistic expectations was around 5 points higher.

High inflation is putting pressure on households' disposable incomes, meaning that private consumer demand is likely to remain subdued. The loss of real income this year is being offset by a noticeable decline in the savings rate.

In the labour market, the decline in the number of unfilled vacancies continued in July. In retail trade, however, these fell once again by double-digit figures compared with the previous year. In the total economy, however, the rate of decline eased slightly. In retail trade (including motor vehicles, according to NACE 2025), 9,124 vacancies could not be filled promptly; in the economy as a whole, the figure was 79,770.

In the retail sector (including motor vehicles, according to NACE 2025), the downward trend (compared with the previous year) continued in July 2026. In the total economy, however, a slight increase was observed once again.

The number of new corporate insolvency proceedings initiated remained at a high level, even though this figure fell for the third consecutive time. In the second quarter of 2026, a total of 960 insolvency proceedings were opened, which was 7.6 percent fewer than in the previous year.