North-Rhine Westphalia CPI

May: +0.1% m/m, +1.0% y/y
April: -0.2% m/m, +0.8% 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
North-Rhine Westphalia rose 0.1% in May, lifting the annual inflation
rate to +1.0% from +0.8% in April, the state statistics office said
Thursday.

The monthly result is in line with the +0.1% median forecast for
pan-German CPI in an MNI survey of analysts. Earlier today the eastern
German states of Saxony and Brandenburg reported CPI rises of 0.1% and
0.2%, respectively, while consumer prices in the western German state of
Hesse remained unchanged on the month.

As in the other states, the relatively high number of holidays in
May drove up prices for the rental of holiday apartments (+12.0%), hotel
services (+3.8%) and packaged holiday tours (+3.5%).

Otherwise, monthly inflation was again driven up by energy prices.
Heating oil rose 2.5%, electricity 0.5% and gas 0.2%. Car fuel prices,
however, dropped 0.5%.

Downward pressure on monthly inflation came from food (-0.5%), with
seasonal food falling 3.3%. Clothing and shoes were 1.3% cheaper than a
month ago.

In an annual comparison, heating oil prices were up 36.4%, motor
fuel up 13.7% and electricity up 2.7%, while gas prices dropped 9.9%.
Food prices climbed 2.2%, with seasonal food rising 8.7%. Clothing and
shoes were 0.2% more expensive than a year ago.

Core inflation remained tame in May. CPI ex-heating oil and motor
fuel was up 0.1% on the month and 0.3% on the year.

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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