Saxony CPI

April: +0.4% m/m, +2.5% y/y
March: +0.5% m/m, +2.0% y/y
—
Pan-German CPI

MNI median forecast: +0.1% m/m, +2.2% y/y
MNI forecast range: -0.1% to +0.4% m/m

March: +0.5% m/m, +2.1% y/y
—

BERLIN (MNI)- Consumer prices in the eastern German state of
Saxony rose 0.4% in April, lifting the annual inflation rate to +2.5%
from +2.0%, 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. Annual inflation posted the
highest rate since October 2008, when it had risen to +2.7%, the
statistics office pointed out.

Upward pressure on monthly inflation in Saxony came from energy
prices, with motor fuel up 3.5%, heating oil up 0.8%, electricity up
0.7% and gas up 0.2%.

Due to the Easter holiday period, packaged holiday tours were 0.2%
more expensive on the month. Airline tickets rose 2.3% and hotel and
restaurant services climbed 0.1%.

Prices for alcoholic drinks and tobacco products rose 0.4%.

Food prices were unchanged on the month, with seasonal food prices
declining by 2.0%. Prices for clothing and shoes were also stable.

Annual inflation was again marked by the surge in energy and food
prices. Heating oil prices rose 26.9%, motor fuel 13.2% and electricity
5.9%, while gas prices were down 1.6%. Food prices climbed 1.8%, with
seasonal food down 3.7%.

Packaged holiday tours rose 10.5% on the year, airline tickets
13.8% and hotel and restaurant services 2.4%. Clothing and shoes were up
3.7% and alcoholic drinks and tobacco products 0.4%.

CPI excluding energy and seasonal food rose 0.3% on the month and
1.8% on the year.

Analysts caution that businesses will increasingly pass on their
high input costs, driven by the spike in energy prices. Selling price
expectations have risen across the board, they point out.

Some analysts already warn of a broad upward trend in inflation
which would increasingly weigh on consumer sentiment. Annual inflation
rates above 2% could become the norm, they fear.

Bundesbank President Axel Weber said earlier this month that
inflation in the Eurozone could average as much as 2.5% this year and
price pressures in Germany may be even more intense.

In Germany, inflation “should also be significantly above 2%,”
Weber said. “I even expect towards the end of the year and in the second
half due to base effects…rates of increase that could be just under
3%.”

European Central Bank president Jean-Claude Trichet said in a
newspaper interview on Tuesday that it is “extremely important to
prevent second-round effects after the ‘hump’ in the headline inflation
rate.” It is “not acceptable,” he said, to allow any perception that
energy and food inflation might become persistent influences on overall
inflation.

“We have risks of second-round effects here and there,” Trichet
observed. “We have to be very alert that they do not materialise.” In
fact, he said, “at the moment I do not see any significant materialising
of second-round effects and I do not see un-anchoring of inflation
expectations. But this is no time for complacency.”

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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