Bavaria CPI

May: +0.4% m/m, +1.5% y/y
April: -0.4% m/m, +1.2% y/y

—

Pan-German CPI

MNI median forecast: +0.3% m/m, +1.4% y/y
MNI forecast range: -0.5% to +0.4% m/m

April: -0.5% m/m, +1.2% y/y

—

BERLIN (MNI) – Consumer prices in the western German state of Bavaria
bounced back 0.4% in May, lifting the annual inflation rate to +1.5% from +1.2%,
the state statistics office said Wednesday.

The monthly result is above the median forecast of +0.3% for pan-German CPI
in a MNI survey of analysts. Earlier today, the eastern German state of Saxony
posted monthly inflation of 0.5%.

Due to the holidays in May, prices for package holiday tours rose 8.0% on
the month. Restaurant and hotel services climbed 0.4%. Food prices increased by
0.5%.

Downward pressure on monthly inflation came from energy prices. Heating oil
fell 1.3%, motor fuel decreased by 1.1% and household energy dropped by 0.2%.

In the annual comparison, heating oil fell 5.2% and motor fuel dropped
4.0%, while household energy rose by 5.2%. Food prices climbed 4.5%.

CPI excluding heating oil and motor fuel rose 0.5% on the month and climbed
1.9% on the year.

Inflation pressure in Germany is seen remaining moderate over the coming
months. Mixed business survey results still signal below-trend growth,
suggesting there will remain significant spare capacity in the economy.

The German Chamber of Industry and Commerce (DIHK) last week lowered its
domestic GDP forecast for this year to +0.3% from +0.7 after its business survey
showed a weaker than expected outcome. “The upswing in Germany has been
adjourned for the time being,” the association concluded.

The Bundesbank said last week that Germany’s economy should recover in the
second quarter, but warned that “overall economic risks remain high” as a result
of the continuing Eurozone debt crisis and lagging economic recovery in many
parts of the currency bloc.

There is not much inflation pressure coming from the wage side either. Pay
hikes so far this year have not been excessively high.

Moreover, declining input costs due to cheaper oil have improved operating
margins and eased pressure on manufacturers to raise output prices. Thus, “no
marked increase of price pressures is to be expected,” the Finance Ministry said
in its latest monthly report. The government expects average inflation of 1.7%
this year.

The European Central Bank currently sees no inflation pressures in the
Eurozone, ECB Executive Board member Joerg Asmussen said Monday. For the moment
inflation “is very low” and inflation expectations “are firmly anchored,” he
remarked.

For detailed information see data table on MNI MainWire.

–MNI Berlin Bureau; tel: +49 30-226-20580; email: twidder@mni-news.com

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