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November 20, 2019

German consumer price inflation remained stable in July

German consumer price inflationGerman consumer price inflation remained stable at 1.5% yoy in July, according to the federal statistical office Destatis. The expectations of economists to slow down to 1.4%. This is the harmonized index used by the European institutions for a fair comparison with data from other Member States. On a monthly basis, consumer prices in Germany grow by 0.4%, which is 0.1 percentage point higher than expected.

A detailed review of the data shows that stable consumer price growth is due to a sharp rise in food prices. There is also an increase in rents, goods, services and energy. German consumer price data suggest an acceleration in base inflation in the federal republic, but there is still much time left until the European Central Bank (ECB) starts raising interest rates.

Eurostat will release the first reading of inflation data across the Eurozone on Monday, assuming a value of 1.3% on an annual basis. Earlier on Friday, inflation figures in Spain rose to 1.7% yoy.

The ECB is expected to shrink its stimulus program in early 2018, arguing that accelerated growth provides sufficient support to the European economy in order to tighten monetary policy.

Any action on the part of the ECB is expected to be moderate and gradual as the underlying inflation excluding food and fuel is just over 1% and there are still no definite signals for upward pressure.

The ECB also fears that wage growth is not responding to better growth and a faster-than-expected decline in unemployment.

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