German HICP inflation likely to improve further in July; Italy’s inflation expected to remain subdued

German HICP inflation is likely to continue improving in July for the third consecutive time. According to a Societe Generale research report, the HICP inflation is likely to reach 0.3 percent year-on-year   in July. Energy prices, which rose for four straight months, are expected to fall in the month resulting in negatively contributing on an annual basis. Meanwhile, food prices are expected to be stable.

However, core inflation is likely to rebound slowly, helped by a slight rise in services prices as non-energy industrial goods are expected to ease. German HICP inflation is likely to continue rebounding at a more rapid pace, rising more than 1 percent by the end of 2016 owing to energy base effects, added Societe Generale.

Meanwhile, Italy’s inflation is likely to remain subdued but stable at -0.2 percent year-on-year in July. Even if inflation is likely to be flat on a monthly basis, the energy component is still expected to record a slightly lesser annual decline because of the base effects, noted Societe Generale.

Food prices are likely to continue rebounding for the fourth straight month. In the mean time, core inflation is expected to remain stable as services prices might increase slightly, whereas non-energy industrial goods prices are expected to weaken for the sixth straight month.

“Looking ahead, Italian inflation will continue to improve, rising to close to 1.0 percent yoy by the end of the year”, stated Societe Generale.