MNI BRIEF: Upside German, EZ CPI Surprises In Store

As the Jackson Hole symposium opens and many European traders focus on comments Saturday from ECB Executive Board member Isabel Schnabel, expectations of further, perhaps hefty, upside surprises to euro area CPI in the Autumn can't be ruled out -- and Schnabel's comments last week saying the central bank needs to take more note of actual incoming data potentially points to more aggressive policy action at coming meetings.

Recent comments from German Finance Minister Christian Lindner point to an end next week for both the heavily-subsidised 'nine-euro' travel tickets and the current relief on motor fuel duty for consumers, as, he says, an extension would be a further EUR 14 billion hit to the state coffers (See MNI INTERVIEW2: See German Fiscal Curbs Despite Recession Risk).

Bundesbank President Joachim Nagel has already warned an end to these subsidies will hit German inflation, with estimates suggesting perhaps a 1% uplift to the annual rate -- which already stood at 7.5% through July and is forecast to rise sharply in August even before the reliefs end and as gas prices continue to surge. Recent PMI data has suggested a modest easing of factory gate prices across the eurozone but the German July PPI print, closing in fast on 40% y/y, as well as the implementation of many contracted price hikes across the eurozone for consumers from Sept 1, suggest another round of price spikes before Q3 is out.