Saxony CPI

April: -0.1% m/m, +1.1% y/y
March: +0.6% m/m, +1.3% y/y
—
Pan-German CPI

MNI median forecast: +0.2% m/m, +1.2% y/y
MNI forecast range: -0.1% to +0.2% m/m

March: +0.5% m/m, +1.1% y/y
—

FRANKFURT (MNI) – Consumer prices in the German state of Saxony
fell 0.1% on the month in April, as cheaper services, and leisure and
culture costs more than offset more expensive energy and food, the
state’s statistics office reported on Wednesday.

However, while the monthly decline lowered the annual gain to +1.1%
from March’s +1.3% level, the statistics office stressed that this did
not mark a turnaround in Saxony’s price index.

With a weight of over 50%, the 0.7% monthly fall in the price for
services certainly made an impact on overall CPI. Also falling on the
month were clothing and shoe prices (-0.3%), and leisure and culture
costs (-3.0%), with package holiday prices registering a notable fall
(-12.1%).

Partially offsetting the declines were food prices (+1.1%) and
apartment rentals including utilities (+0.1%), the latter receiving a
significant boost from household energy prices (+0.8%). Energy prices
overall were up 1.5% on the month.

On the year, the strongest gains were heating oil costs (+31.0%)
and motor fuel (+16.1%), which left energy costs up 6.0% year-over-year.

While the overall index lost ground in April, energy costs negated
part of the decrease. Excluding energy, core CPI was 0.3% lower than in
March and was +1.0% on the year.

While the base effects of oil prices are expected to wane in the
coming months, the recent strengthening of crude costs is likely to
delay this.

Households polled in the latest GfK consumer sentiment report
highlighted that, despite a more optimistic outlook for both the economy
and their own financial situations, rising oil prices were lifting
overall price expectations, thus hindering the propensity to spend.

According to the research group’s confidence indicator, households’
desire to buy declined April, adding to March’s modest slide.

Other commodity prices, especially food, are also expected to lift
consumer prices over the medium term, due to growing demand from
emerging economies, the International Monetary Fund said in its latest
World Economic Outlook report.

Nevertheless, government inflation forecasts point to moderate
price growth in Germany. Currently, the national consumer price index is
expected to average a growth rate of 1.3% in 2010 before accelerating
slightly to +1.4% next year.

Forecasts out of various economic institutes, as well as the IMF,
also suggest moderate gains in consumer prices over this year and the
next.

Germany’s leading economic institutes and the Fund forecast German
annual average harmonised inflation of +0.9% and +1.0% this year and
next. DIW forecasts for 2010 were similar. However, prices are expected
to jump 1.3% over 2011, according to DIW, mainly driven by energy and
commodity prices.

— Frankfurt bureau tel.: +49-69-720142. Email: frankfurt@marketnews.com

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