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Rise in German Inflation Figures

James Boston
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Rise in German Inflation Figures

The Preliminary German inflation data for the month is giving us a clear picture as to the overall Eurozone price growth situation. Today’s numbers are subject to revision but their prominence as those of the largest Eurozone economy is insuring that the market takes note.

The Consumer Price Index (CPI) reading for the month of June is now showing at 0.3% change month on month, this follows May’s final figure of -0.1% contraction and compare to a consensus estimate of 0.2% price growth. Year on year the data is now showing 1.0% expansion in comparison to the 0.9% experienced last month, markets had been anticipating this change to 1% for this reading.

The less prominent but more relevant Harmonized Index of Consumer Prices (HICP) is reinforcing the CPI data. Today’s reading for June is showing 0.4% price growth month on month compared to the -0.3% contraction in May, consensus estimates were for a 0.2% pickup this month. The key year on year number has been announced as 1.0%, this follows the 0.6% reading in May and outperforms the consensus estimate for 0.7% growth this month.

The importance of today’s inflation data cannot be underestimated. The European Central Bank (ECB) has been under pressure for the greater part of this year to take definitive action to address the Eurozone’s persistently low price growth activity. Many of the Eurozone economies, particularly those on the periphery are experiencing deflation and have been for many months, this phenomena however gets masked when the weighting attached to large economies such as Germany is included.

Overall Eurozone inflation is important for bloc stability and the currency effects, but many of the smaller, heavily indebted, nations are experiencing price contraction. Germany’s readings today give a clue to the overall Eurozone inflation level and therefore likely ECB actions on the matter, they do however present any useful information on situation in the smaller economies.

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