Baden-Wuerttemberg CPI

October: flat m/m, +1.7% y/y
September: +0.2% m/m, +2.0% y/y
—
Pan-German CPI

MNI median forecast: flat m/m, +2.0% y/y
MNI forecast range: -0.1% to +0.1% m/m

September: flat m/m, +2.0% y/y
—

BERLIN (MNI)- Consumer prices in the western German state of
Baden-Wuerttemberg were unchanged in October, dampening the annual
inflation rate to +1.7% from +2.0%, the state statistics office said
Monday.

The monthly result is in line with the median forecast for a flat
reading of pan-German CPI in a MNI survey of analysts. Bavaria, Saxony
and Brandenburg all registered earlier on Monday monthly CPI rises of
0.1% while North Rhine-Westphalia and Hesse posted a flat reading.

Upward pressure on inflation in Bavaria came from prices for
clothing and shoes, which rose 1.8% on the month. Food prices climbed
0.2%, with seasonal food up 0.6%.

Energy prices were mixed, with heating oil up 3.0% and household
energy up 0.7% while motor fuel decreased by 4.2%.

Prices for packaged holiday tours fell 3.1%. Hotel and restaurant
services decreased by 0.1%.

Annual inflation was again marked by rising energy prices. Heating
oil prices rose 10.9%, household energy climbed 4.9% and motor fuel was
up 4.8%.

Food prices were 3.8% higher than a year ago, with seasonal produce
up 8.9%. Prices for clothing and shoes were up 3.0% on the year.

The Finance Ministry said last week it expected only moderate
inflation in Germany over the coming months given the subdued global
economic trends. In its latest economic forecast released earlier this
month, the government predicted inflation of 2.0% this year and 1.9%
next year.

Import prices in Germany fell back in September due to declines in
most major components led by energy.

Some analysts, however, expect inflation in Germany to pick up over
the medium term given that monetary policy in the Eurozone is too
expansionary for Germany.

Pipeline price pressures seem to be mounting in the private sector,
the PMI polls suggest, with input costs seeing another moderate rise in
October (55.0). Pricing-power, by contrast, remained subdued due to
strong competition and weaker demand. Output prices increased only
slightly in October (50.7) after three months of marginal decline.

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 like Germany
could 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.

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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