Saxony CPI

May +0.1% m/m, +1.1% y/y
April: -0.1% m/m, +1.1% y/y
—
Pan-German CPI

MNI median forecast: +0.1% m/m, +1.2% y/y
MNI forecast range: -0.3% to +0.3% m/m

April: -0.1% m/m, +1.0% y/y

—

BERLIN (MNI) – Consumer prices in the eastern German state of
Saxony rose 0.1% in May, leaving the annual inflation rate unchanged
from the previous month at +1.1%, the state statistics office said
Thursday.

The monthly result — the first from the six states to release
preliminary inflation figures — is in line with the median forecast of
+0.1% for pan-German CPI in a MNI survey of analysts.

Due to the relatively high number of holidays in May, prices for
hotel services rose 4.9% on the month and for packaged holiday tours
3.5%. Prices for education climbed 0.6% due to a 2% increase of fees for
daycare facilities for children.

Otherwise, monthly inflation was again driven up by energy prices.
Heating oil rose 2.5%, car motor fuel 0.5%, gas 0.2% and electricity
0.1%.

Downward pressure on monthly inflation came from food prices
(-1.2%) with seasonal food falling 5.9% and vegetables 7.5%. Clothing
and shoes were 0.5% cheaper than a month ago.

In an annual comparison, heating oil prices were up 35.3%, motor
fuel 13.9% and electricity 4.6%, while gas prices dropped 6.5%. Airline
tickets rose 2.0 while prices for packaged holiday tours fell 2.7% and
for hotel services 0.8%.

Food prices climbed 0.7% with seasonal food rising 6.4%, fruit 4.7%
and vegetables 4.2%. Clothing and shoes were 1.9% more expensive than a
year ago.

Core inflation remained tame in May. CPI ex-energy and seasonal
food prices was up 0.2% on the month and 0.5% on the year.

While analysts expect energy prices to continue trending upward,
they see underlying inflation remaining moderate for the time being. The
huge spare capacity in the German economy and the cloudy outlook for
consumer spending leave firms little leeway for raising price, they
note.

Concerns about government debt in the Eurozone and worries about
the stability of the euro are eroding consumer confidence in Germany,
GfK reported Wednesday. GfK’s forward-looking indicator fell to a
reading of 3.5 for June, after May’s downwardly revised 3.7 (3.8)
result.

With unemployment expected to rise throughout the year — albeit
less than initially feared — wage growth in all likelihood will remain
subdued. German trade unions so far this year have settled for moderate
wage deals.

The Bundesbank noted in its monthly report released Wednesday that
recent German CPI rises have been mainly driven by increasing energy
prices. “Upward price pressures from the domestic economy will likely
remain for the time being extremely limited,” the central bank said.

The German government forecasts average inflation rates of +1.3% in
2010 and +1.4% next year. The country’s leading economic institutes
project average inflation of only +0.9% and +1.0% this year and next.

For detailed information see data table on MNI MainWire.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

[TOPICS: M$G$$$,MAGDS$,M$X$$$,M$XDS$,MT$$$$]