Saxony CPI

March: +0.5% m/m, +2.0% y/y
February: +0.5% m/m, +2.2% y/y
—
Pan-German CPI

MNI median forecast: +0.4% m/m, +2.1% y/y
MNI forecast range: +0.2% to +0.7% m/m

February: +0.5% m/m, +2.1% y/y
—

BERLIN (MNI)- Consumer prices in the eastern German state of
Saxony rose 0.5% in March, dampening the annual inflation rate to +2.0%
from +2.2%, the state statistics office said Tuesday.

The monthly result is above the median forecast of +0.4% for
pan-German CPI in a MNI survey of analysts. On Monday, the western
German state of North Rhine-Westphalia also posted monthly inflation of
+0.5%.

As in NRW, upward pressure on monthly inflation in Saxony came from
energy prices, with heating oil up 7.6%, motor fuel up 4.8%, electricity
up 0.9% and gas up 0.2%. Prices for clothing and shoes rose 3.5%.
Alcoholic drinks and tobacco products climbed 0.6%.

Food prices fell 0.1% on the month, with seasonal food prices
declining by 1.9%. Packaged holiday tour fees fell 2.2% and hotel and
restaurant prices were down 0.1%.

Annual inflation was again marked by the surge in energy and food
prices. Heating oil prices rose 32.1%, motor fuel 12.6% and electricity
5.2%, while gas prices were down 1.6%. Food prices climbed 2.9%, with
seasonal food up 3.2%.

Underlying inflation remained relatively moderate in February. CPI
excluding energy and seasonal food rose 0.3% on the month and 1.1% on
the year.

Analysts expect only a moderate acceleration of inflation over the
coming months and see no marked danger of a price-wage spiral at the
moment. Still, they caution that businesses will increasingly pass on
their high input costs, driven by the spike in energy prices.

Bundesbank President Axel Weber warned earlier this month that the
“price climate [in Germany] has … deteriorated”. He added, though,
that “it should not be forgotten that up to now, this has been due
mostly to exogenous shocks, particularly from energy prices”.

Still, early monetary tightening by the European Central Bank is
warranted to counter inflationary pressures that may be more permanent
than currently projected, the ECB Governing Council member said.

ECB Executive Board member Juergen Stark, a German national, said
last week that he sees risks of second-round inflation effects in the
Eurozone and added that, while inflation expectations remain anchored,
uncertainty has increased.

Speaking with the Japanese publication Nikkei, Stark also said that
“conditions are there and there are good reasons to normalise the
monetary policy stance,” when asked about a possible rate increase next
month.

“But I think that given the heightened uncertainty I cannot make
any commitment for the ECB nor for the Governing Council,” Stark said.
“And the ECB did not commit to anything.”

However, the central banker noted that the ECB’s staff projections
took into account market expectations of a rate increase. Stark also
highlighted the correct perception that the central bank was more
concerned regarding the inflation outlook.

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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