Flash German HICP inflation to print at 0.2%

Flash German HICP in July is expected to recover but only marginally to 0.2% yoy after having declined sharply from 0.7% yoy in May to 0.1% yoy in June. On the details, weak energy prices are expected to continue to suppress headline as gasoline and brent crude continue to remain weak. But seasonal variations in the core components should drive the expected marginal rise in HICP. In the month of June, Germany's HICP inflation slowed sharply from 0.7% yoy in May to 0.1% yoy in June with national CPI at 0.3% yoy in June compared to 0.7% yoy in May. The softening of prices was a result of a continued decrease in energy prices and lower prices paid for services. 

The energy component fell from -5.0% yoy to -5.9% yoy in June, cutting 10bp from the headline alongside a slower increase in services which fell from 1.5% yoy in May to 0.9% yoy in June, cutting 31bp. Food inflation rose 1.0% yoy slightly lower compared to 1.4% yoy in May. On the core components front, prices paid for services were noticeably lower due to the decline in prices paid for package holidays (due to the calendar effect), but the services component was underpinned by an increase in net rent exclusive of heating expenses. Prices of goods fell by 0.5% led by decreases for telephones, consumer electronics and information processing equipment.