North-Rhine Westphalia CPI

July: +0.2% m/m, +1.1% y/y
June: flat m/m, +0.7% y/y
—
Pan-German CPI

MNI median forecast: +0.3% m/m, +1.1% y/y
MNI forecast range: flat to +0.4% m/m

June: +0.1% m/m, +0.9% y/y

—

BERLIN (MNI) – Consumer prices in the western German state of
North-Rhine Westphalia rose 0.2% in July, lifting the annual inflation
rate to +1.1% from +0.7% in June, the state statistics office said
Wednesday.

The monthly result was below the +0.3% median forecast for
pan-German CPI in an MNI survey of analysts. Saxony earlier today also
reported a monthly CPI rate of +0.2%, while Brandenburg and Hesse both
posted rates of +0.3%.

Due to the start of the holiday period in NRW, prices for packaged
holiday tours rose a marked 13.9% on the month. Hotel services were up
9.1% and rent for holiday appartments spiked 24.9%.

Upward pressure on monthly consumer prices also came from food
(+0.2%) with seasonal food prices rising 0.5%. On the energy side,
prices for electricity climbed 0.1% while prices for gas were unchanged.
Heating oil prices dropped 3.2% and motor fuel prices were down 1.6%.

Downward pressure came also from prices for clothing and shoes,
which fell 4.6% on the month.

In an annual comparison, food prices climbed 3.3% with seasonal
food up 13.1%. Energy price developments were mixed with heating oil
prices rising 26.5%, motor fuel prices up 12.5%, and electricity prices
climbing 2.8%. Gas prices, however, fell 2.1%.

Core inflation also remained tame in July. CPI ex-seasonal food was
up 0.2% on the month and 0.8% on the year. CPI-ex heating oil and motor
fuel rose 0.3% on the month and 0.5% on the year.

Both headline and core inflation rates are seen remaining low over
the coming months due to a still-substantial degree of slack in the
German economy.

Moreover, wage growth in all likelihood will stay subdued, given
that pay deals have been very moderate up to now. The pricing power of
businesses is still low in light of weak demand.

At the same time, it is not expected that Germany will be heading
into outright deflation territory. The Bundesbank last month forecast
German average inflation of +1.2% this year and +1.6% next year.

ECB Executive Board member Juergen Stark said earlier this month
that there are no deflationary risks in the Eurozone.

“I do not see short-term deflationary risks,” Stark said, noting
that currently only one Eurozone country has negative inflation rates.
Recent money developments also do not point to a deflationary trend
ahead, the ECB’s chief economist observed. “We expect a very gradual
recovery in M3 growth in the months to come.”

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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