Hesse CPI

July: +0.3% m/m, +0.9% y/y
June: +0.1% m/m, +0.8% y/y
—
Brandenburg CPI

July: +0.3% m/m, +1.1% y/y
June: flat m/m, +0.5% 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 eastern German state of
Brandenburg and in the western German state of Hesse rose 0.3% in July,
the respective state statistics offices said Wednesday.

Monthly CPI results in the two states were in line with the median
pan-German forecast of +0.3% in an MNI survey of analysts. Saxony
earlier today posted a monthly price rise of 0.2%.

Annual inflation rates were positive both in Brandenburg (+1.1%)
and Hesse (+0.9%).

Developments in motor fuel (-1.4% m/m in Brandenberg, -2.6% m/m in
Hesse) and heating oil (-1.2% m/m in Brandenberg, -2.9% m/m in Hesse)
tempered the monthly increase of the overall indexes.

Excluding the two energy components, the core CPIs were up 0.5% in
both states.

Conversely, those same two components boosted the annual change in
both Brandenburg and Hesse. Without taking into account motor fuel
(+11.0%) and heating oil prices (+16.9%), the index was up only 0.7%,
0.4 percentage point below the overall growth rate in Brandenburg.
Excluding costlier motor fuel (+11.4%) and heating oil (+28.5%), the
core rate in Hesse came to +0.3% y/y.

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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