Saxony CPI

June: +0.1% m/m, +1.0% y/y
May: +0.1% m/m, +1.1% y/y

—

BERLIN (MNI)- Consumer prices in the eastern German state of
Saxony rose 0.1% in June, dampening the annual inflation rate to +1.0%
from +1.1% last month, the state statistics office said Friday.

Due to the upcoming start of the holiday season, prices for
packaged holiday tours rose 0.7% compared to May, while hotel
services were 3.4% more expensive and airline tickets were up 0.3%.

Food prices climbed 0.7%, with seasonal food up 0.8%, fruits up
4.8% and vegetables down 2.5%. Electricity prices rose 0.1%, heating oil
0.3%, while gas prices remained unchanged and motor fuel prices fell
0.7%. Prices for clothing and shoes were down 1.0%.

In an annual comparison, heating oil prices were up 25.0%, motor
fuel +8.5% and electricity +4.7%, while gas prices dropped 6.3%. Food
prices climbed 1.3%, clothing and shoes were 1.8% more expensive than a
year ago. Prices for packaged holiday tours fell 1.5% and for hotel
services 0.9%, while airline tickets climbed 0.5%.

Core inflation also remained tame in June. CPI ex-energy and
seasonal food prices was up 0.1% on the month and 0.6% on the year. CPI
ex-energy was up 0.2% on the month and 0.7% on the year.

Inflation rates will likely remain near their current levels for
the coming months given the huge spare capacity in the German economy.
Wage growth in all likelihood will remain subdued. Trade unions so far
this year have settled for moderate wage deals.

Deflation risks are still relatively low, analysts argue, noting
that the weak euro exchange rate is making imports more expensive. They
also point out that corporate selling price expectations have turned
around recently.

Others, however, reckon that imported inflation is offset by strong
downward pressure on underlying domestic prices and warn that deflation
remains a threat for the Eurozone as a whole.

The Bundesbank earlier this month forecast German average inflation
of +1.2% this year and +1.6% next year.

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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