German inflation remains tame in July

28th July 2010, Comments 0 comments

German inflation rose to 1.1 percent this month, higher than the June figure of 0.9 percent but slightly below analyst forecasts for Europe's biggest economy, provisional figures showed Wednesday.

German consumer price inflation had been expected at 1.2 percent this time around, according to analysts polled by Dow Jones Newswires.

On a monthly basis, inflation came in at 0.2 percent, slightly below expectations for a 0.3 percent gain.

The Destatis statistics office pointed to higher energy prices, principally for heating and motor fuels, as the main factor in the July pick-up.

But it also noted "strong increases in fruit and vegetable prices," as well as seasonal hikes in the cost of package tours and holiday lodging.

Capital Economics senior European economist Jennifer McKeown nonetheless forecast the full-year figure would be much lower.

"With core inflation still very subdued and likely to remain so, we see the headline rate ending the year near zero," she said.

"If we are right in expecting the oil price to fall back to 60 dollars a barrel by year-end, this increase will soon be reversed," McKeown added.

UniCredit chief German economist Andreas Rees agreed that "despite the currently strong economic upswing, we do not see any significant upward price pressure in the next few months."

But he added that "for 2010 as a whole, we expect consumer prices to rise by roughly 1.0 percent."

With inflation in Europe's top economy subdued, the European Central Bank is likely keep its main interest rate at a record low of 1.0 percent well into 2011, economists say.

© 2010 AFP

0 Comments To This Article