Carsten Brzeski, chief economist at ING, notes that German headline inflation is losing more momentum and seems to be on its way to what European Central Bank President Mario Draghi would call a re-anchoring at lower levels.
Key Quotes
“According to the just-released first estimate, German headline inflation dropped to 0.9% year-on-year in September, from 1.0% YoY in August. The national inflation measure dropped to 1.2% YoY from 1.4% YoY in August. Judging from the available regional data, headline inflation weakened on the back of lower food and energy prices. Where available, core inflation measures remained relatively stable.”
“At least for the time being, the feared growing contagion from the manufacturing meltdown to the rest of the German economy is not (yet) materialising. Even better, private consumption should benefit from lower inflation rates in the coming months because, in the words of Mario Draghi, “with low inflation, you can buy more stuff”. It’s hard to see Germans listening to Draghi these days but if they do, they would definitely temper growing recession fears.”
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