German Inflation Weakest in More Than a Year in Blow to ECB
Annual consumer-price growth in the euro area’s largest economy was 1.3 percent, compared with a forecast of 1.4 percent.
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German inflation slowed to the weakest in more than a year in May, highlighting that euro-zone price pressures remain weak.
Annual consumer-price growth in the euro area’s largest economy was 1.3%, compared with a forecast of 1.4% in a Bloomberg survey. Earlier figures from German states showed a drop in prices of clothing as well as a significant decline in the cost of package tours that had surged in April because of the Easter holidays.
The report suggests that inflation in the 19-nation euro area, due out on Tuesday, will ease from its five-month high. Those data will come just two days before the European Central Bank meets in Vilnius to set policy and publish updated economic projections.
Some officials last month expressed concern that price pressures remain “uncomfortably” below the goal of just under 2%. Market-based measures of inflation expectations have continued to slide since then.
Still, Bundesbank President Jens Weidmann, a contender to be the next ECB president, said this week that he still sees price pressures and that there is currently no urgent need for additional stimulus.
What Our Economists Say
“The German economy is operating close to capacity and the strong 1Q GDP reading suggests it remains in robust shape. Even if growth were to dip in the middle of this year, we’d still expect a full recovery to trend by the end.”
-- David Powell. See his GERMANY REACT
The ECB is expected next week to repeat its promise that interest rates will remain at record lows until at least the end of the year and offer euro-area banks generous terms on a new round of longer-term loans, according to a Bloomberg survey of economists.
--With assistance from Kristian Siedenburg and Harumi Ichikura.
To contact the reporter on this story: Piotr Skolimowski in Frankfurt at pskolimowski@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Paul Gordon
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