Bavaria CPI

July: +0.3% m/m, +1.2% y/y
June: +0.1% m/m, +0.9% y/y
—
Pan-German CPI

MNI median forecast: +0.3% m/m, +1.1% y/y
MNI forecast range: flat to +0.4% m/m

June: +0.1% m/m, +0.9% y/y

—

BERLIN (MNI) – Consumer prices in the German state of Bavaria rose
0.3% in July, lifting the annual inflation rate to +1.2% from +0.9% in
June, the state statistics office said Wednesday.

The monthly result was in line with the MNI median forecast of
+0.3% for pan-German CPI. Earlier today, Brandenburg and Hesse also both
reported CPI rates of +0.3% while North Rhine-Westphalia,
Baden-Wuerttemberg and Saxony each posted rates of +0.2%.

Due to the start of the holiday period, prices for packaged holiday
tours in Bavaria rose a marked 13.9% on the month. Hotel services were
up 8.9% .

Upward pressure on monthly consumer prices also came from food
(+0.5%) with seasonal food prices rising 0.3%. On the energy side,
prices for heating oil dropped 3.1%, motor fuel prices were down 1.8%,
and prices for household energy fell 0.3%.

Downward pressure also came from prices for clothing and shoes,
which fell 3.4% on the month.

In an annual comparison, food prices climbed 2.9% with seasonal
food up 10.4%. Heating oil prices rose 28.3%, motor fuel prices were up
11.6%, and prices for household energy rose 1.6%.

Core inflation also remained tame in July. CPI ex-heating oil and
motor fuel rose 0.5% on the month and 0.6% on the year.

Both headline and core inflation rates are seen remaining low over
the coming months due to a still-substantial degree of slack in the
German economy.

Moreover, wage growth in all likelihood will stay subdued, given
that pay deals have been very moderate up to now. The pricing power of
businesses is still low in light of weak demand.

At the same time, it is not expected that Germany will be heading
into outright deflation territory. The Bundesbank last month forecast
German average inflation of +1.2% this year and +1.6% next year.

ECB Executive Board member Juergen Stark said earlier this month
that there are no deflationary risks in the Eurozone.

“I do not see short-term deflationary risks,” Stark said, noting
that currently only one Eurozone country has negative inflation rates.
Recent money developments also do not point to a deflationary trend
ahead, the ECB’s chief economist observed. “We expect a very gradual
recovery in M3 growth in the months to come.”

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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