German preliminary headline consumer inflation slows in July

The German inflation rate came in slightly below expectations in July. The preliminary figures for Germany’s headline consumer prices came in at 2.1 percent. According to calculations based on the results from the federal states, the core inflation rate excluding energy and food has not changed compared with the previous month, but stays at a moderate level of 1.4 percent, stated Commerzbank in a research report. An unusual surge in package holiday prices was countered by an equally unusual sharp fall in clothing prices.

Nevertheless, there might be slight movement in the core pace in the months ahead. After all, negotiated wages have increased much more strongly in recent months after the high wage settlement in the metal industry, among others. The average for the months March to May was 3.2 percent higher than in the same period of the previous year, in May alone the year-on-year comparison was even 4 percent. Last year it was just more than 2 percent on average.

A sustained rise in wage growth, in the past, has also left its mark on consumer prices. In 2007 and 2008 and in 2011 and 2012, underlying inflation strengthened with a little delay, although the core inflation rate rose much less that the rates of wage rises.

“Similar can be expected for the rest of this year and for 2019. The German core inflation rate will certainly not jump by more than one percentage point as wages have done, but should gradually move towards 2 percent”, added Commerzbank.

At 14:00 GMT the FxWirePro's Hourly Strength Index of Euro was slightly bullish at 55.6484, while the FxWirePro's Hourly Strength Index of US Dollar was bearish at -92.7587. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex