In the months from April to June, gross domestic product in the 19-country currency bloc shrank by 12.1% from the previous quarter, the European Union's statistics office Eurostat said in its flash estimates.
The deepest GDP fall since time series started in 1995 coincided with COVID-induced lockdowns that began to ease in many euro zone countries only from May.
The contraction was slightly more pronounced than market expectations of a 12.0% fall, and followed the 3.6% GDP drop recorded in the first quarter of the year.
Inflation continued instead its upward trend, defying expectations of a slowdown, supporting the European Central Bank's expectation that a negative headline reading may be avoided.
Eurostat said consumer prices in the bloc rose 0.4% on an annual basis in July from 0.3% in June and 0.1% in May. Economists polled by Reuters had forecast a 0.2% increase in July.
Underlying price pressure also accelerated. Excluding volatile food and energy prices, a key measure watched by the ECB, inflation rose by 1.3% from 1.1% in June, Eurostat's flash estimates showed.
An even narrower gauge, which also excludes alcohol and tobacco, jumped to 1.2% from 0.8% in June.
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