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'Germany Ticket' Underpinning Easing Services CPI

MNI (London)

GERMANY FLASH MAY CPI -0.1% M/M, +6.1% Y/Y (= MNI CALC, BBG FCST +0.2% M/M, +6.5% Y/Y)

GERMANY FLASH MAY HICP -0.2% M/M (BBG FCST +0.2%); +6.3% Y/Y (BBG FCST +6.7%)

The German flash CPI print for May surprised to the downside based on consensus expectations, but matched MNI's calculations posted this morning based on 88% of available state data.

  • German CPI contracted on the month by -0.1% (CPI) and -0.2% (HICP). Prices cooled by 1.1pp to +6.1% y/y (CPI) and by 1.3pp to +6.3% y/y (HICP).
  • The non-harmonised data saw a 4.2pp deceleration in energy prices to +2.6% y/y in May alongside a 2.3pp slowdown in food inflation to +14.9% y/. This accounted for the bulk of lower May inflation, assisting the 1.6pp slowdown in goods inflation to +7.7% y/y. To what extent core goods inflation eased remains ambiguous, yet PMI data suggests a deceleration in industrial goods.
  • Services inflation also eased in May, down 0.2pp at +4.5% y/y. Destatis linked this deceleration as likely due to the introduction of the "Germany Ticket" for transport.
  • This alongside today's state data points towards a decent reduction in core CPI for Germany, after holding close to the euro-era high at +5.8% y/y in April. Core CPI data excluding both energy and food is only available for six states which account for 50% of the headline index. These all saw core CPI easing by 0.2pp to 0.7pp on the headline annualised prints, with a weighted average reduction of -0.47pp.

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