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3rd UPDATE: Six German States' Data Show CPI Rising On Year

 
   (Adds data from Baden-Wuerttemberg and analyst comment.) 
 
   By Geoffrey T. Smith 
   Of DOW JONES NEWSWIRES 
 

FRANKFURT (Dow Jones)--Consumer prices in six of Germany's largest federal states rose in year-on-year terms for the first time since the spring, according to data published Thursday.

The figures appear to signal the end of a brief period in which the collapse in energy prices in the wake of the global financial crisis dragged the overall cost of living down, and they bear out widespread expectations that the rate of change in prices will stabilize above zero in the coming months.

In October, prices had risen 0.1% on the month and were unchanged from a year earlier. The Federal Statistics Office, Destatis, is now due to release a preliminary figure for the whole of Germany for November.

Timo Klein, an analyst with IHS Global Insight in Frankfurt, said the reports reinforce his expectations that core inflation is settling around an annual 0.5% in the near term, but added that he expects it to rise in 2010, prompting the European Central Bank to withdraw its non-standard monetary stimulus measures gradually.

However, inasmuch as the headline inflation rate is likely to remain clearly below the ECB's target of "close to, but below, 2.0%," Klein said he doesn't expect the ECB to raise its key interest rates until the middle of 2010 at the earliest.

Baden-Wuerttemberg, the last of the six states to report, said its consumer price index fell 0.2% from October but was up 0.4% from November 2008.

Reports from the other five states - North Rhine-Westphalia, Bavaria and Hesse in western Germany and Saxony and Brandenburg in eastern Germany, had all likewise shown an increase of between 0.2% and 0.4% in their consumer price indexes on the year, and a monthly decline of 0.1%-0.2%.

Clothing, package tours and entertainment all registered declines that were only partly offset by increases in vehicle fuel and seasonal food prices.

Jacques Cailloux, an economist with Royal Bank of Scotland Group PLC in London, noted that core inflation in Germany, although weak, remains "stickier" than in other euro-zone countries where unemployment has risen faster and households have been under more pressure to reduce their debt burdens.

Analysts polled ahead of time by Dow Jones Newswires, expect the overall German CPI to have fallen by 0.1% from October but be up 0.4% from November.

 
   Web site: www.destatis.de 
 

-By Geoffrey T. Smith, Dow Jones Newswires; +49 69 29725-520; geoffrey.smith@dowjones.com

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(END) Dow Jones Newswires

November 26, 2009 09:44 ET (14:44 GMT)


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