Germany’s HICP inflation rate rose to +0.3% in April, from +0.1% in March, a slightly bigger rise than suggested by the regional data from the German states published earlier today and the +0.2% expected by us and the consensus. It is likely that the downward influence of energy prices faded a bit further in response to the rise in oil prices in euro terms seen over the month. Looking ahead, German CPI inflation looks likely to continue to edge higher over the coming months as energy effects fade further and the decline in the euro lifts import prices. Much bigger amounts of slack in other parts of the currency union will mean that inflation remains low across the euro-zone as a whole, and perhaps negative in the peripheral countries which need higher inflation in order to tackle their debt mountains. Capital Economics notes – “April’s slightly bigger-than-expected rise in German HICP inflation will reinforce hopes that recent price declines were a temporary phenomenon that will have positive effects on the economy. But with core inflation still low, there remains a risk of a more damaging and sustained bout of deflation in the euro-zone as a whole.”
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