Rise in German HICP inflation reflected higher energy and food inflation

German HICP inflation rose from -0.1% to +0.1%, putting it back in positive territory after only two months below zero. 

No breakdown is published yet, but patchy information in the regional releases suggests that the rise reflected higher energy and food inflation. Neither was surprising given the increase in the euro-denominated oil price this month and earlier rise in agricultural commodity prices. 

"March's rise in German HICP inflation will add to hopes that recent price declines were a temporary phenomenon that will have positive effects on the economy. But with core inflation still very low even in Germany, there remains a risk of a more damaging and sustained bout of deflation in the euro-zone as a whole.

We expect energy prices to continue to exert a heavy drag on the headline rate for the next six months or so, which may see headline inflation dip back into negative territory in the near future. But the drag should ease somewhat later this year." - said Capital Economics in a report on Monday.