–Pan-German CPI Likely To Surprise On The Downside

Baden-Wuerttemberg CPI

December: +0.6% m/m, +2.2% y/y
November: flat% m/m, +2.5% y/y

—

Pan-German CPI

MNI median forecast: +0.8 m/m, +2.2% y/y
MNI forecast range: +0.6% m/m to +1.2% m/m

November: flat m/m, +2.5% y/y

—

FRANKFURT (MNI) – Consumer prices in the German state of
Baden-Wuerttemberg rose in December, boosted by costlier leisure,
entertainment and food, the state’s statistics office reported Thursday.

But the rise, as in all other German states, was less than analysts
had expected, which means that the national pan-German figure is also
likely to surprise on the downside.

Baden-Wuerttemberg’s rise in entertainment and food costs was
offset by cheaper energy products.

Overall, prices rose 0.6% on the month in December, after
stagnating in November, to give an annual rate of +2.2%.

As Brent crude slipped over 2% between November and December, both
motor fuel (-1.6%) and heating oil (-4.9%) prices lost ground on the
month. Household energy prices (-0.8%) were also cheaper compared to
November.

Conversely, leisure and entertainment prices jumped 4.6% on the
month for a 1.2% rise on the year. Hotel and restaurant prices increased
5.9% m/m to give an annual change of +1.8%. Food and alcoholic beverages
were also more expensive, with prices up 0.3% and 2.1% on the month and
year, respectively.

The December PMI report noted a further decline in German price
pressures, as manufacturers linked cheaper raw material to the third
consecutive dip input prices, while “strong competitive pressures”
limited firms’ price setting behaviour.

Nevertheless, the still-promising business outlook could well give
companies room to hike prices further. According to an Ifo institute
survey, the proportion of manufacturers looking to raise selling prices
in the near term recovered in December after a six-month decline to its
highest level since the summer.

Ifo forecasts average German CPI at 1.8% next year after 2.3% this
year. The Organisation for Economic Cooperation and Development sees
inflation slowing to 1.6% next year from 2.4%.

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

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