North Rhine-Westphalia CPI

September: flat m/m, +1.6% y/y
August: +0.4% m/m, +1.9% y/y
—
Pan-German CPI

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

August: +0.4% m/m, +2.1% y/y
—

BERLIN (MNI)- Consumer prices in the western German state of North
Rhine-Westphalia remained unchanged in September, dampening the annual
inflation rate to +1.6% from +1.9%, the state statistics office said
Wednesday.

The monthly result is above the median forecast of -0.1% for
pan-German CPI in a MNI survey of analysts.

After the end of the holiday period, prices for packaged holiday
tours fell 8.3%, while hotel and restaurant services were down 2.1%.

Food prices decreased 0.3%, with seasonal produce down 2.3%.

Following the summer clothing sales, prices for clothing and shoes
rose 5.0% on the month.

On the energy side, heating oil rose 1.3%, motor fuel was up 1.1%,
gas climbed 0.4%, while electricity remained unchanged.

Annual inflation was markedly affected by the end of university
tuition fees in October 2011. Without this special effect, the annual
inflation rate would have amounted to 2.1%, the statistics office said.

On the energy side, heating oil prices rose 10.9%, motor fuel was
up 7.8%, gas prices climbed 4.0% and electricity prices rose 3.8%.

Food prices were 2.2% higher than a year ago, with seasonal produce
up 6.2%.

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.

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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