Bavaria CPI

March: +0.5% m/m, +1.1% y/y
February: +0.5% m/m, +0.5% y/y
—
Pan-German CPI

MNI median forecast: +0.3% m/m, +0.9% y/y
MNI forecast range: flat to +0.4% m/m

February: +0.4% m/m, +0.6% y/y
—

BERLIN (MNI) – Consumer prices in the German state of Bavaria rose
0.5% in March, lifting the annual inflation rate to +1.1% from +0.5% in
February, the state statistics office said Monday.

The monthly result was above the median forecast of +0.3% for
pan-German CPI in an MNI survey of analysts. Earlier today, North
Rhine-Westphalia, Saxony and Hesse also posted monthly inflation rates
above the median forecast, while only of that of Brandenburg was in line
with it. Thus, pan-German CPI will most likely come in higher than
expected.

Similar to the other states, monthly inflation in Bavaria was
mainly driven by energy price developments. Car motor fuel was up 5.8%,
and heating oil 8.2%. Prices for clothing and shoes rose 1.7% and
seasonal food prices were up 3.6%.

In an annual comparison, heating oil prices were up 26.0% and motor
fuel 18.9%. Seasonal food prices climbed 4.1% and prices for clothing
and shoes 0.1%.

Core inflation remained tame in March. CPI ex-heating oil and motor
fuel was up only 0.2% on the month and 0.3% on the year.

Analysts expect underlying inflation to stay moderate for the time
being. The huge slack in the German economy and a clouded outlook for
consumer spending leave firms little leeway for price hikes, they note.

With unemployment expected to rise throughout the year, wage growth
in all likelihood will remain very moderate. Germany’s largest trade
union, the IG Metall, recently settled for a moderate pay rise in the
important metalworking and engineering industry.

Bundesbank President Axel Weber predicted earlier this month that
price levels in Germany will rise only very moderately given the fairly
subdued nature of the recovery.

The OECD forecast last week that German GDP would grow by 1.3% in
2010 and by 1.9% in 2011. On a workday-adjusted basis, it put German GDP
at +1.1% in 2010 and +1.9 in 2011.

Despite growth above potential — estimated to be 0.8% over the
period from 2009 to 2011– a sizable output gap will remain even at the
end of 2011, the OECD said. That is likely to restrain inflationary
forces, it remarked.

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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