Carsten Brzeski, Chief Economist at ING, points out that based on the results of several regional states, German headline inflation dropped marginally to 2.1% year on year in June, from 2.2.% YoY in May, both in the national and European measure of consumer price inflation.
Key Quotes
“Headline inflation, however, is still heavily affected by seasonal effects. The sharp surge in oil prices with public holidays and long weekends are currently the main drivers of headline inflation.”
“Under the surface of (too) many one-off factors, German inflation data still tells a two-sided story: while prices for consumer goods have gradually accelerated in recent months, inflation on services has slowed down and has even been negative for a couple of months for communication and clothing.”
“Looking ahead, the outlook for the German economy still looks solid. The two biggest risks are clearly a possible negative sentiment loop on the back of the ongoing trade war talks (even though the hard economic impact so far is close to zero) and further domestic political turmoil.”
“With regards to inflation, new temporary disinflationary forces have emerged since yesterday.”
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