Final HICP

June: flat m/m, +2.4% y/y (unrevised)
May: -0.2% m/m, +2.4% y/y

Final CPI

June: +0.1 m/m, +2.3% y/y (unrevised)
May: flat m/m, +2.3% y/y

FRANKFURT (MNI) – German annual HICP inflation in June was
confirmed at 2.4%, marking the fifth consecutive month that the rate has
remained above 2%, the Federal Statistical Office reported on Tuesday.

In national CPI terms, prices were up 2.3% compared to June 2010,
also in line with preliminary estimates. On the month, the flat reading
for HICP and the 0.1% rise in CPI were also confirmed.

Excluding household energy (+0.4% m/m) and motor fuel prices (-1.7%
m/m), core CPI was up 0.2% on the month, resulting in an annual change
of +1.5%.

Among the more heavily weighed categories, food and non-alcoholic
drink prices were unchanged between May and June, resulting in 3.1% rise
on the year. Apartment and utility prices rose 0.2% m/m to give an
annual increase of 3.0%.

Driven by the 7.2% spike in package holiday prices, leisure costs
jumped 1.5% on the month and 1.6% on the year.

Likely due to summer sales, clothing and shoe prices fell 1.9% on
the month to give an annual change of +1.3%.

Since their last brief dip at the end of June, energy prices have
resumed their upward trend. With the onset of the summer driving season,
gasoline prices are likely to climb further, boosting overall inflation.

Both the Bundesbank and the European Commission expect energy costs
to continue to boost consumer prices in Germany, forecasting inflation
well above 2% this year.

Conversely, the core rate, which excludes energy, should “remain
contained” this year and next, the Commission said, adding that “no
significant second-round effects” were expected.

Costlier fuel continued to drive input prices in Germany’s private
sector in June, the latest PMI report said, adding that price pressures
in the service sector were “only slightly weaker” than at their peak in

Input price inflation for the private sector as a whole fell to a
seven-month low, however, as manufacturers’ cost burden eased, the PMI
report noted. yet prices at the factory gate remained dynamic, leading
to a modest rise in output price inflation for the private sector.

Selling-price expectations declined in June in all major business
sectors except construction, a Commission survey showed. Still, the
proportion of firms expecting prices to trend higher in the near term
remained well above the long-term average.

The proportion of consumers expecting higher prices also declined
in June, falling to a five-month low and below average for the first
time since January, the Commission added.

European Central Bank President Jean-Claude Trichet said last week
that inflation in the Eurozone was likely to remain above target over
the coming months and stressed that medium-term price stability risks
“remain on the upside”.

“It remains of paramount importance that the rise in HICP inflation
does not translate into second-round effects in price and wage-setting
behaviour and lead to broad-based inflationary pressures,” he said.

“Inflation expectations must remain firmly anchored in line with
the Governing Councils aim of maintaining inflation rates below, but
close to, 2% over the medium term.”

— Frankfurt bureau: +49 69 720 142; email: —

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