Saxony CPI

August: flat m/m, +1.1% y/y
July: +0.2% m/m, +1.2% y/y
—
Pan-German CPI

MNI median forecast: +0.1% m/m, +1.1% y/y
MNI forecast range: flat to +0.2% m/m

July: +0.3% m/m, +1.2% y/y
—

BERLIN (MNI) – Consumer prices in the eastern German state of
Saxony were overall flat in August, dampening the annual inflation rate
to +1.1% from +1.2% in July, the state statistics office said Friday.

The monthly result — the first from the six states to release
preliminary inflation figures — is slightly below the median forecast
of +0.1% for pan-German CPI in an MNI survey of analysts.

Downward pressure on monthly inflation came from food prices, which
fell 1.2%, with seasonal produce down 5.2%. Prices for clothing and
shoes fell 0.3%.

Energy price developments were mixed. Heating oil rose 0.9% on the
month, while motor fuel fell 0.3%. Both electricity and gas prices were
flat on the month.

Prices for alcoholic drinks and tobacco products climbed 0.2% on
the month. Prices for packaged holiday tours were 1.3% higher than in
July.

In the annual comparison, heating oil prices rose 15.8%,
electricity prices 6.2% and motor fuel prices 5.8%, while gas prices
were down 1.8%. Food prices were 2.7% higher than a year ago and prices
for clothing and shoes up 0.2% on the year.

Core inflation also remained tame in August. CPI excluding energy
and seasonal foods was flat on the month and up 0.5% on the year.

Despite the ongoing robust economic upswing, both headline and core
inflation rates are seen remaining low over the coming months. The
remaining slack in the economy is expected to offset any increase in
imported inflation related to the weaker euro.

The Bundesbank asserted in its August Monthly Report that “for the
coming months a continued moderate price increase is to be expected
despite the upward pressure from imports.”

Analysts point out that the pricing-power of businesses remains
weak, as private consumption is not expected to become a major growth
engine in coming quarters. Wage growth in all likelihood will stay
subdued, given that pay deals have been very moderate up to now.

At the eurozone level there are also few inflation risks seen at
the moment.

“We continue to expect price developments to remain moderate over
the policy-relevant medium-term horizon, benefiting from low domestic
price pressures,” European Central Bank President Jean-Claude Trichet
said earlier this month.

For detailed information see data table on MNI MainWire.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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