German inflation at 7-month high in May

Consumer prices in Germany hit their highest level in seven months in May while investor confidence falls

Photo by: Reuters
Photo by: Reuters

Updated Jul 28, 2015

German consumer prices rose at their fastest rate in seven months in May, while the ZEW Centre’s index of investor and analyst expectations fell to its lowest level in seven months, according to data announced on Tuesday.

Consumer prices increased by 0.1 percent on a monthly basis and 0.7 percent on a yearly basis, according to data announced by Germany’s federal statistics office Destatis.

The Mannheim-based ZEW Centre for European Economic Research’s index, which indicates investor confidence, slid to 31.5 in June from 41.9 in May, falling for a third consecutive month. Analysts had estimated the index would drop by 4.8 points to 37.1 in June.

The inflation data appears to indicate that the European Central Bank’s (ECB) monetary policy measures are starting to slowly push prices upwards. The reading for the ZEW index shows on the other hand that risks from a possible Greek default to volatility in the bond markets are causing uncertainty in Europe’s largest economy.

German prices showed their largest annual increase since October 2014 when they rose by the same rate, confirming initial estimates.The Harmonised Index of Consumer Prices (HICP), the indicator used by the ECB, rose by 0.5 percent in April year on year.

In March the ECB started a massive $1.5 trillion bond purchase programme to fight against deflation and end stagnation in the eurozone economy. The inflation rate is still significantly under the ECB's annual inflation target of just below two per cent.

European stock markets were broadly lower by mid-day after the data, with Germany's DAX slumping by 1 percent, France’s CAC 40 shed 0.7 percent and London’s FTSE 100 dipped 0.45 percent.

TRTWorld and agencies