Flash Sep HICP: flat m/m, +2.1% y/y

MNI median forecast: flat m/m, +2.1% y/y
MNI forecast range: -0.2% to +0.2% m/m

Final Aug HICP: +0.4% m/m, +2.2% y/y
————–
Flash Sep CPI: flat m/m, +2.0% y/y

MNI median forecast: -0.1% m/m, +1.9% y/y
MNI forecast range: -0.2% to +0.2% m/m

Final Aug CPI: +0.4% m/m, +2.1% y/y
————–

BERLIN (MNI) – German consumer prices in September came in flat
both in national and EU-harmonized terms, leaving annual rates at +2.0%
for CPI and +2.1% for HICP, the Federal Statistical Office (FSO)
estimated Wednesday.

The median forecasts in a MNI survey of analysts were for a 0.1%
monthly drop of CPI and a flat reading of HICP.

The Federal Statistics Office provides no details on national price
developments with the flash release. Data from states reporting earlier
in the day had indicated a decrease in price pressures compared to last
month, though slightly less of one than economists had initially
forecast.

After the end of summer clothing sales, prices for clothing and
shoes in particular spiked in most states, rising at least 4% on the
month. Energy prices also mostly posted gains, especially motor fuel,
while food prices typically declined on the month. Packaged holiday
tours and prices for hotels and restaurants also declined after the
summer season.

Energy and food prices also continued to drive annual inflation
higher.

The Finance Ministry predicted last week that inflation in Germany
will likely moderate over the coming months due to sinking producer
price pressures resulting from slowing global economic growth.

Some analysts, however, expect inflation to pick up over the medium
term given that monetary policy in the Eurozone is too expansionary for
Germany. With labour costs already up 1.5% in 2Q and further rises
expected, firms may try to raise prices to preserve profit margins.

The economic panel of the German Banking Association (BDB),
consisting of the chief economists of the main private banks in Germany,
last week forecast inflation of 2.0% this year and 1.9% next year.

Due to the difficult economic situation and the modest outlook for
the Eurozone, the panel expects the ECB to cut rates this year again by
another 25 basis points to 0.5%.

While stronger wage growth could lead to inflation risks down the
road, Pier Carlo Padoan, chief economist with the Organisation for
Economic Cooperation and Development, argued recently that Germany
should consider raising its inflation tolerance to help debtor Eurozone
members better adjust.

By accepting higher wage inflation, creditor countries such as
Germany would provide a boost to debtor countries via increased
consumption, while lower wages would allow the Eurozone’s debtor nations
to be more competitive, Padoan said.

Yet, German Chancellor Angela Merkel on Tuesday rejected such
demands, calling on debtor nations instead to bring down their unit
labor costs to become more competitive.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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