North-Rhine Westphalia CPI

March: +0.6% m/m, +1.2% y/y
February: +0.4% m/m, +0.6% 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 western German state of
North-Rhine Westphalia rose 0.6% in March, lifting the annual inflation
rate to +1.2% from +0.6% in February, the state statistics office said
Monday.

The monthly result was above the +0.3% median forecast for
pan-German CPI in an MNI survey of analysts. Saxony and Hesse earlier
today also posted inflation rates above the median forecast, while that
of Brandenburg was in line with it. Thus, there is a clear risk that
pan-German inflation will come in higher than expected.

As in the other states, monthly inflation in NRW was mainly driven
by energy price developments. Car motor fuel was up 6.9%, heating oil
7.5%, electricity 0.2% and gas 0.1%. Prices for clothing and shoes rose
1.9% and food prices were up 0.7%, with seasonal food up 4.5%.

In an annual comparison, heating oil prices were up 35.1%, motor
fuel 21.1% and electricity 3.4%, while gas prices dropped 19.2%. Prices
for clothing and shoes climbed 0.5% and food prices 0.8%, with seasonal
food rising 5.9%.

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