German preliminary headline inflation slows down in November, core rate likely to pick up slowly in 2019

German preliminary inflation slowed down in the month of November. On a year-on-year basis, the preliminary consumer price index dropped to 2.3 percent in November from 2.5 percent seen in the prior month. Consensus expectations were for the inflation to have come in at 2.4 percent.

Especially, energy has become markedly more expensive for German consumers due to the sharp increase in oil prices. Nevertheless, the core inflation rate, which excludes energy and food, dropped to 1.5 percent from 1.7 percent, noted Commerzbank in a research report.

Even after this setback in November, however, a stable rise in underlying inflation has been emerging from some time in Germany. Core rate is set to average 1.5 percent this year, after 1.4 in 2017 and 1.2 percent in 2016.

“We expect this trend to continue and expect a core inflation rate of 1.7 percent in 2019. This is because the upturn in the German economy will continue next year, albeit at a slower pace, which should further boost the labour market”, said Commerzbank.

This might increase the bargaining power of the trade unions, which were already able to push through quite respectable wage agreements in several industries in 2018.

“In this respect, we also expect a substantial increase in collective wages of around 3% in 2019, which companies will pass on at least in part to consumers”, added Commerzbank.

At 16:00 GMT the FxWirePro's Hourly Strength Index of Euro was bullish at 98.8872, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 22.2146. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex