Flash June HICP: flat m/m, +2.4% y/y

MNI median forecast: +0.2% m/m, +2.5% y/y
MNI forecast range: +0.1% to +0.2% m/m

Final May HICP: -0.2% m/m, +2.4% y/y
————–

Flash June CPI: +0.1 m/m, +2.3% y/y

MNI median forecast: +0.1 m/m, +2.3% y/y
MNI forecast range: flat to +0.3% m/m

Final May CPI: flat m/m, +2.3% y/y
————–

FRANKFURT (MNI) – German EU harmonized inflation surprised to the
downside in June, coming in flat on the month, the Federal Statistical
Office reported on Tuesday.

With HICP unchanged on the month, the index was up 2.4% on the
year, unchanged from May’s y/y rise. Expectations had been for a 0.2%
rise on the month and a jump of 2.5% on the year.

In national terms, however, inflation came to +0.1% m/m as
expected, resulting in a yearly jump of 2.3%, also as forecast.

While a breakdown will not be made available until July 12,
releases from the six largest states showed modest increases in food
prices on the month, along with gains in leisure prices and sharp drops
in motor fuel prices.

The Bundesbank expects inflation to average 2.5% this year, with
energy prices alone up 10%. Assuming that consumers spend one tenth of
their budget on energy, the central bank estimates that energy would add
one percentage point to headline inflation. The core rate, which
excludes energy, is expected at +1.5%.

Next year, the Bundesbank sees inflation slowing to +1.8%, with the
core rate at +1.6%.

“Due to the lagged effects of higher crude oil prices on gas prices
and the shared cost of amenities, as well as to continually rising costs
for a more environmentally friendly generation of electricity, energy
prices will probably increase disproportionately in 2012, also —
although, at just under 3%, at a much weaker rate than in 2011,” the
Bundesbank argued.

The European Commission also sees energy exerting further upward
pressure on inflation this year, boosting HICP to an average of +2.6%
from +1.2% last year. HICP would then slow to +2.0% in 2012. The core
rate would “remain contained” at 1.3% and 1.8%, respectively, this year
and the next, with “no significant second-round effects” expected, the
Commission added.

After six months of increases, consumers’ assessment of future
price trends were unchanged in May at a nearly three-year high, the
Commission’s survey showed. Conversely, selling price expectations
across all major sectors except retailing eased in May — from recent
record highs in both industry and services.

–Frankfurt bureau: +49-69 720 142; email: frankfurt@marketnews.com —

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