Baden-Wuerttemberg CPI

May: +0.2% m/m, +1.4% y/y
April: -0.2% 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 western German state of
Baden-Wuerttemberg rose by 0.2% in May, lifting the annual inflation
rate to +1.4% from +1.1% in April, the state statistics office said
Thursday.

The monthly result was above the median forecast of +0.1% for
pan-German CPI in an MNI survey of analysts. Earlier today, North
Rhine-Westphalia and Saxony had posted monthly CPI of +0.1%, while
consumer prices rose 0.2% in Brandenburg and Bavaria and remained flat
in Hesse.

As in the other states, the relatively high number of holidays in
May drove up leisure and culture prices (+0.9%) on the month, along with
restaurant and hotel prices (+1.2%).

Otherwise, monthly inflation was again driven up by energy prices.
Heating oil rose 2.6%, while household energy prices gained 0.9%. But
car fuel was 0.1% cheaper than in April.

Downward pressure on monthly inflation came from food (-1.0%), with
seasonal food falling 4.8%. Clothing and shoes were 0.2% cheaper than a
month ago.

In an annual comparison, heating oil prices were up 34.2%, while
motor fuel was 14.7% more expensive. Household energy managed only a
modest 0.6% rise. Food prices climbed 0.5%, with seasonal food rising
5.5%. Clothing and shoes were 2.7% more expensive than a year ago.

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 to hike prices, 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 3.5 in
June after May’s downwardly revised 3.7 (3.8).

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

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