Saxony CPI

September: +0.2% m/m, +2.0% y/y
August: +0.3% m/m, +2.1% 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 eastern German state of
Saxony rose 0.2% in September, dampening the annual inflation rate to
+2.0% from +2.1%, the state statistics office said Wednesday.

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

After the end of summer clothing sales, prices for clothing and
shoes spiked 7.8% on the month.

Energy prices were mixed, with motor fuel up 1.6%, electricity flat
and both gas and heating oil down 0.1%.

After the end of the holiday period, prices for packaged holiday
tours fell 8.3% while hotel and restaurant services were down 2.7%.
Airline tickets fell 2.9%.

Food prices decreased 0.5% with seasonal produce down 3.4%.

Annual inflation was again marked by rising energy prices. Heating
oil prices rose 10.8%, motor fuel was up 8.6%, gas prices
climbed 4.6% and electricity prices rose 0.6%.

Food prices were 2.8% higher than a year ago with seasonal produce
up 6.0%. Prices for clothing and shoes were up 2.8% on the year.

CPI excluding heating oil and motor fuel was up 0.1% on the month
and 1.6% on the year. CPI-ex seasonal food was up 0.2% on the month and
1.9% on the year.

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 to rather 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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