German flash HICP inflation should print at 0.6% yoy in May after reading 0.3% in April. The biggest driver of the recovery in consumer prices is again likely to be rising energy prices. However, the rise in energy prices should be partly mitigated by the ongoing reduction in power and natural gas prices due to the positive effects of investment in these sectors in recent years. In April, German HICP inflation was 0.3% yoy. The national measure came in at 0.5% yoy. The deceleration of inflation in the energy component was less pronounced, and the figure increased from -7.3% yoy in March to -5.7% yoy in April, which added 17bp to the headline index. Food inflation also accelerated, from -0.4% yoy to -0.1% in April, adding 3bp to the headline figure. Among the core components, services and rent prices fell, each cutting 10bp from the headline figure. “We expect German HICP inflation to average 0.4% in 2015 and 1.7% in 2016, while the core metric should remain stable at 1.2% in 2015 and 1.4% in 2016”, says Societe Generale.
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