Saxony CPI

October: +0.1% m/m, +2.0% y/y
September: +0.2% m/m, +2.0% y/y

Pan-German CPI

MNI median forecast: flat m/m, +2.0% y/y
MNI forecast range: -0.1% to +0.1% m/m

October: -0.1% m/m, +1.9% y/y

BERLIN (MNI) – Consumer prices in the eastern German state of
Saxony rose 0.1% in October, leaving the annual inflation rate steady at
+2.0%, the state statistics office said Monday.

The monthly result is above the median forecast for a flat reading
for pan-German CPI in a MNI survey of analysts. The western German state
of Hesse on Friday posted a flat reading.

Upward pressure on inflation in Saxony came from prices for
clothing and shoes, which rose 2.2% on the month. Food prices climbed
1.0%, with seasonal food up 3.6%.

Energy prices were mixed, with heating oil up 1.7% and gas up 0.2%
while electricity remained flat and motor fuel was down 2.9%.

Prices for packaged holiday tours fell 3.1%, hotel and restaurant
services dropped 0.2%, while airline tickets rose 0.8%.

Annual inflation was again marked by rising energy prices. Heating
oil prices rose 10.1%, motor fuel was up 6.2%, gas prices climbed 2.8%
and electricity prices rose 0.5%.

Food prices were 3.3% higher than a year ago, with seasonal produce
up a whopping 11.1%. Prices for clothing and shoes were up 3.6% on the

CPI excluding heating oil and motor fuel was up 0.2% on the month
and 1.6% on the year. CPI-ex seasonal food was up 0.1% on the month and
1.8% on the year.

The Finance Ministry said last week it expects only moderate
inflation in Germany over the coming months given the subdued global
economic trends. In its latest economic forecast released earlier this
month, the government predicted inflation of 2.0% this year and 1.9%
next year.

Import prices in Germany fell back in September due to declines in
most major components led by energy.

Some analysts, however, expect inflation in Germany to pick up over
the medium term given that monetary policy in the Eurozone is too
expansionary for Germany.

Pipeline price pressures seem be mounting in the private sector,
the PMI polls suggest, with input costs seeing another moderate rise in
October (55.0). Pricing-power, by contrast, remained subdued due to
strong competition and weaker demand. Output prices increased only
slightly in October (50.7) after three months of marginal decline.

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 like Germany
could 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.

For detailed information see data table on MNI MainWire.

–Berlin bureau: +49-30-22 62 05 80; email:

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