BLBG:Inflation Slows in Four German States as Seasonal Food, Oil Costs Decline
Inflation in four German states slowed in August as seasonal food and energy prices fell.
The inflation rate decreased to 2.3 percent from 2.7 percent in North Rhine-Westphalia and to 1.9 percent from 2.2 percent in Hesse, the states’ statistics offices said today. The rates in Saxony and Brandenburg also eased.
Economists forecast that German inflation, calculated using a harmonized European Union method, will decelerate to 2.5 percent from 2.6 percent, the median of 16 estimates in a Bloomberg News survey shows. The Federal Statistics Office in Wiesbaden will release that report, based on data from six states, later today.
Crude oil prices have retreated 25 percent since breaching $114 a barrel in late April as economic growth cools around the globe. While European Central Bank President Jean-Claude Trichet on Aug. 4 said euro-region inflation will stay “clearly above” the central bank’s 2 percent limit in coming months, he emphasized that uncertainty about the economic outlook is “particularly high.”
“Energy prices are bringing some relief from price pressures at the moment,” said Jens Kramer, an economist at NordLB in Hanover. “Inflation will trend toward 2 percent by the end of the year and that’s a positive environment for the ECB to follow a steady-hand policy.”
Rates on Hold
The ECB raised borrowing costs twice this year, bringing the benchmark rate to 1.5 percent. Economists expect the Frankfurt-based central bank to keep interest rates on hold until the second quarter of next year as the economic slowdown contains inflation, a Bloomberg survey shows.
The German economy, Europe’s largest, almost stalled in the second quarter as the region’s sovereign debt crisis weighed on confidence. France’s recovery unexpectedly ground to a halt and Greece’s economy contracted. The Federal Reserve this month pledged to keep interest rates near zero for another two years to bolster a recovery that’s moving “considerably slower” than expected.
In Hesse, consumer prices fell 0.2 percent from the previous month, today’s report showed. Heating oil costs declined 4.7 percent from July and fuel was 3.1 percent cheaper. Prices for seasonal foods such as fresh fruit and vegetables were 6.1 percent lower in the month and fell 7 percent in the year.
In the euro region, inflation probably held at 2.5 percent in August, a Bloomberg survey shows. Eurostat, the European Union’s statistics office in Luxembourg, is scheduled to release that data on Aug. 31.
Monthly Yearly
Change Change
North Rhine-Westphalia -0.2% (0.4%) 2.3% (2.7%)
Brandenburg -0.1% (0.5%) 2.1% (2.2%)
Hesse -0.2% (0.5%) 1.9% (2.2%)
Saxony -0.1% (0.4%) 2.4% (2.5%)
Baden-Wuerttemberg n/a% (0.5%) n/a% (2.7%)
Bavaria n/a% (0.5%) n/a% (2.3%)
To contact the reporter on this story: Christian Vits in Frankfurt at cvits@bloomberg.net
To contact the editor responsible for this story: Matthew Brockett at mbrockett1@bloomberg.net
