Germany: Harmonized inflation rises in July
Harmonized inflation ticked up to 2.6% in July from June’s 2.5%. The reading matched the Euro area average of 2.6% but surprised markets on the upside. Looking at the details of the release, prices for food and non-alcoholic beverages plus housing and utilities rose at a faster pace in July, just outweighing a slower increase in prices for transportation and hospitality.
Meanwhile, the trend pointed down, with annual average harmonized inflation coming in at 3.2% in July (June: 3.5%). Consumer price inflation ticked up to 2.3% in July from June’s 2.2%.
Lastly, harmonized consumer prices rose 0.54% in July over the previous month, picking up from June’s 0.15% increase.
ING’s Carsten Brzeski commented:
“Looking ahead, the stickiness of inflation at slightly too high a level looks set to continue as favourable energy base effects are petering out while, at the same time, wages are increasing. Leading indicators like selling price expectations do not give real guidance currently but very recently re-accelerated and remain slightly above the historical average in services and below the historical average in manufacturing. In any case, with new high wage demands, it is hard to see German wage growth coming down in the second half of the year.”