Baden-Wuerttemberg CPI

March: +0.7% m/m, +1.3% y/y
February: +0.2% m/m, +0.3% y/y
—
Pan-German CPI

MNI median forecast: +0.3% m/m, +0.9% y/y
MNI forecast range: flat to +0.4% m/m

February: +0.4% m/m, +0.6% y/y
—

BERLIN (MNI) – Consumer prices in the western German state of
Baden-Wuerttemberg rose by 0.7% in March, lifting the annual rate to
+1.3% from +0.3% in February, the state statistics office said Monday.

The monthly rise was above the +0.3% median forecast for pan-German
CPI in a MNI survey of analysts. Earlier today, North Rhine-Westphalia,
Saxony, Bavaria and Hesse also posted monthly inflation rates above the
median forecast, while only Brandenburg was in line with it. Thus,
pan-German CPI will almost certainly come in higher than expected.

As in the other states, monthly inflation was mainly driven by
energy price developments. Car motor fuel was up 7.7% and heating oil
7.2%. Prices for clothing and shoes rose 2.3% and seasonal food prices
were up 5.5%.

In an annual comparison, heating oil prices were up 29.7% and motor
fuel 20.8%. Prices for clothing and shoes rose 1.7% and seasonal food
prices climbed 0.7%.

Still, analysts expect underlying inflation to stay moderate for
the time being. The huge slack in the German economy and a clouded
outlook for consumer spending leave firms little leeway for price hikes,
they note.

With unemployment expected to rise throughout the year, wage growth
in all likelihood will remain very moderate. Germany’s largest trade
union, the IG Metall, recently settled for a moderate pay rise in the
important metalworking and engineering industry.

Bundesbank President Axel Weber predicted earlier this month that
price levels in Germany would rise only very moderately given the fairly
subdued nature of the recovery.

The OECD forecast last week that German GDP would grow by 1.3% in
2010 and by 1.9% in 2011. On a workday-adjusted basis, it put German GDP
at +1.1% in 2010 and +1.9 in 2011.

Despite growth above potential — estimated to be 0.8% over the
period from 2009 to 2011– a sizable output gap will remain even at the
end of 2011, the OECD said. That is likely to restrain inflationary
forces, it remarked.

For detailed information see data table on MNI MainWire.

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

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