Hesse CPI

July: +0.4% m/m, +1.7% y/y
June: flat m/m, +1.8% y/y
—
Pan-German CPI

MNI median forecast: +0.4% m/m, +1.7% y/y
MNI forecast range: +0.2% to +0.6% m/m

June: -0.1% m/m, +1.7% y/y
—

BERLIN (MNI) – Consumer prices in the western German state of Hesse
rose 0.4% in July, dampening the annual inflation rate to +1.7% from
+1.8%, the state statistics office said Friday.

The monthly result is in line with the median forecast for
pan-German CPI in an MNI survey of analysts. Saxony, North
Rhine-Westphalia, Baden-Wuerttemberg and Brandenburg also posted monthly
price increases of 0.4%.

During the holiday period, airline tickets were up 8.7% on the
month and package holiday tours rose 14.9%. Hotel and restaurant
services climbed 2.5%.

Energy price developments were mixed, with heating oil up 5.7%,
motor fuel up 2.8% and gas up 0.1%, while electricity was unchanged.

Food prices fell 1.2%, with seasonal produce down 5.6%.

Due to unusually cold summer weather, clothing retailers had to
give marked discounts, cutting prices for clothing and shoes by 4.8%.

Annual price developments were again marked by energy prices. Gas
was up 4.7%, heating oil rose 4.5%, electricity climbed 3.0% and motor
fuel was up 2.6%. Food prices rose 3.6%, with seasonal produce up 7.3%.

CPI excluding heating oil and motor fuel rose 0.3% on the month and
1.7% on the year. CPI-ex energy and seasonal products and services was
down 0.3% on the month and up 1.2% on the year.

Pointing to easing commodity prices due to moderating global
economic growth, the Finance Ministry said last week that “there is no
inflation risk at the moment for Germany from current price developments
on global markets.”

Import prices fell for the third consecutive month in June on the
back of ever cheaper energy products. The 1.5% monthly fall knocked
import prices down to their lowest level for the year and the annual
rate to +1.3%, its slowest pace since December 2009.

Modest global economic growth and demand are likely to limit oil
price gains in the coming months, according to the International Energy
Agency. Yet prices could still remain high in absolute terms due to
ongoing supply-side risks and potential emerging market demand, the IEA
warned.

The uncertainty surrounding economic developments in general and
inflation in particular in Germany and elsewhere are posing significant
challenges for monetary policy, the Bundesbank said in its latest
monthly report released Monday.

“The crisis in the Eurozone is dampening the German economy more
heavily than previously expected,” the DIW economic research institute
warned earlier this month, adding, though, that a recession was not
expected.

German business confidence eroded more than generally expected in
July to its lowest level since early 2010, as firms adjusted downward
their assessment of both the current situation and the near-term
outlook, the Ifo institute reported on Wednesday.

European Central Bank president Mario Draghi said earlier this
month that the Eurozone “inflation path is moving favourably” towards
the ECB’s medium-term inflation goal of close to but below 2%.

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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