* Data shows 1.5 pct German inflation in July
* Economists had expected slip to 1.4 pct
* Data firms expectations for central bank tightening
* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr (Updates prices, adds U.S. data)
LONDON, July 28 (Reuters) - Europe's benchmark bond yield approached levels not seen since January 2016 on Friday after data showed higher-than-expected inflation in the bloc's largest economy.
A preliminary reading showed Germany's year-on-year inflation at 1.5 percent in July, matching the previous month but beating forecasts of 1.4 percent in a Reuters' poll of economists.
The data confirmed a trend seen earlier on Friday, with the German states of North Rhine-Westphalia, Bavaria and Baden-Wuerttemberg all reporting rising consumer price growth.
More robust inflation supports the view that the European Central Bank may move to scale back some of its massive monetary stimulus later this year.
Euro zone-wide data is due on Monday, with analysts predicting a slight slip to 1.2 percent from 1.3 percent, well below the central bank's near 2 percent price target. Friday's data casts doubt over those forecasts.
"We've also had an upside surprise in Spanish inflation numbers this morning and upbeat French GDP data so the combination is supportive of the ECB moving towards the exit," said Chris Scicluna, head of economic research at Daiwa Capital Markets in London.
Spain earlier on Friday posted 1.7 percent year-on-year inflation in July, a touch above forecasts and last month's 1.6 percent print.
Data on inflation and growth in France -- the bloc's second largest economy -- was bang in line with expectations.
In Germany, North Rhine Westphalia saw annual inflation in July rise to 1.8 percent from 1.6 percent previously while Bavaria's CPI rose to 1.6 percent from 1.4 percent and Baden-Wuerttemberg's to 1.7 percent from 1.6 percent.
Bond yields rose broadly as the German data filtered through, with 10-year yields up 2-4 basis points across the euro zone.
German 10-year yields rose as much as 5 basis points to 0.587 percent, approaching levels not seen in 19 months.
A long-term gauge of the market's euro zone inflation expectations, the five-year, five-year breakeven forward rate, rose to a two-month peak at 1.6057 percent.
Still, data showing U.S. labour costs increased less than expected in the second quarter, adding to concerns that U.S. inflation will remain low, taking the edge off the sell-off in euro zone markets in afternoon trade.
Reports that North Korea has fired missiles also lifted demand for safe-have bonds, but yields in the euro zone remained higher on the day.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.bi z / c m s / ? p a g e I d = l i v e m a r k e t s
(Reporting by John Geddie and Dhara Ranasinghe; Editing by Catherine Evans and Richard Balmforth)