Final HICP

May: -0.2% m/m, +2.4% y/y (unrevised)
April: +0.3% m/m, +2.7% y/y

Final CPI

May: flat m/m, +2.3% y/y (unrevised)
April: +0.2% m/m, +2.4% y/y
—

FRANKFURT (MNI) – The slowdown in German inflation in May was
largely due to cheaper energy, which offset the rise in food prices,
according to detailed data released Friday by the Federal Statistical
Office.

The FSO confirmed its flash estimate for a 0.2% monthly dip in the
EU-harmonized HICP rate, which dampened the annual rise to 2.4% from
2.7% in April. The CPI rate was also confirmed at unchanged on the month
and 2.3% higher on the year after +2.4% in April. It was the first
decline in the annual rate in eight months.

Reflecting the sharp downturn in oil prices in early May, household
energy costs declined 0.7% on the month, due to a 5.9% drop for heating
oil. Diesel motor fuel dropped 3.4%, though super edged up 0.3%.

Nevertheless, energy costs remained the culprit for high annual CPI
rates, lifting household energy costs by 8.3% and motor fuels by 11.4%.
Excluding energy, the CPI was flat in May and only 1.4% higher on the
year.

Costlier food and drinks also contributed to the annual CPI rise
with a 3.3% increase. On the month, food prices rose 0.6%, boosted by
milk products and eggs and fruits.

While annual rates may be peaking and base effects should pull them
down markedly towards the end of the year, the respite from the
underlying push of commodities may well prove temporary.

Oil prices had begun retracing losses even before members of OPEC
this week blocked the Saudis’ attempt to expand production quotas,
sending Brent crude prices to their highest level in over a month.

This prompted the International Energy Agency to repeat its call
“for a prompt increase in supply…Otherwise, a further tightening in
the market and potential increases in prices risk undermining economic
recovery.”

Germany’s manufacturing PMI polls show input prices slowing for the
third month in a row in May, but at 70.5 the rise remained brisk. So far
this slowdown has had only a marginal impact on the ongoing climb in
factory-gate prices.

Selling price expectations, while easing somewhat in May, remain
close to record highs in all sectors except for construction, according
to the European Commission’s surveys. Nor have consumers’ inflation
fears yet abated.

The Commission sees EU harmonized inflation prices in Germany this
year averaging 2.6% before easing to 2.0% next year. Core inflation is
expected to “remain contained” at around 1.3% this year, then rise to
1.8% in 2012. The Commission assumes there will be “no significant
second-round effects,” given the experience of the previous spike in
commodity prices in 2008.

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

[TOPICS: M$G$$$,M$X$$$,MAGDS$,M$XDS$,MT$$$$]