German headline inflation accelerates in June, core rate likely to pick up slightly

The German headline inflation accelerated in June. On a year-on-year basis, the flash estimate came in at 1.6 percent, as compared with consensus expectations of 1.4 percent. While the slower rise in energy prices eased this rise, the core inflation rate rose to 1.6 percent in June from May’s 1.1 percent.

The solid fluctuations in the core rate in the past four months might be greatly linked to the late date of Easter and Whitsun in 2019. The corresponding typical holiday seasons this year were in April and June and not March and May as last year. This seasonal shift caused the previous year’s change in package tour prices to fluctuate sharply.

Without this special effect, there has been a slight upward trend in underlying inflation for around half a year. Such raises have already been seen on many occasions in recent years. However, in the longer term, core inflation is expected to pick up a bit, noted Commerzbank in a research report. In spite of the current economic softness, employment figures are rising and wages are continuing to rise decently. In the long run, firms might have to pass on the rising costs – at least in part – to consumers.

“The perceptible rise in package prices in June is likely to have pushed up core inflation in the euro zone as well - we expect an increase from 0.8 percent to 1.1 percent. However, the overall inflation rate is likely to have risen only slightly from 1.2 percent to 1.3 percent due to the simultaneously slower rise in energy prices”, added Commerzbank.

At 18:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at 35.3543 while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 31.6791 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex