German headline inflation accelerates further in October

German headline inflation accelerates again in the month of October, coming in above expectations. On a year-on-year basis, the consumer price inflation accelerated from 2.3 percent in September to 2.5 percent in October, as compared with consensus expectations of a rise of 2.4 percent. The solid increased in energy prices compared with the earlier year was mainly countered by softer food prices. Therefore, the core inflation rose to 1.7 percent from 1.5 percent.

Package tours, which rose 7 percent, drove the core inflation. Without this impact, core inflation rose just slightly. This signifies that core inflation has apparently overcome the sag in the summer months, during which it dropped briefly to 1.3 percent, noted Commerzbank in a research report.

Nevertheless, there are still no signs of a trend upturn in underlying inflation. This is unexpected in view of the significant wage settlements in the metal and electrical industries, the public sector, the construction industry and the chemical industry since the start of the year.

“This should be a matter of time as our statistical analysis shows that the Phillips curve remains valid and that low unemployment will lead to higher consumer price inflation through higher wage increases”, stated Commerzbank.

At 17:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at 7.27584, while the FxWirePro's Hourly Strength Index of US Dollar was bullish at 76.7237. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex