Germany inflation seen picking up again in July as state readings accelerate
The German state readings released around the same time:
- Bavaria July CPI +2.8% vs +2.5% y/y prior
- North Rhine Westphalia July CPI +2.7% vs +2.1% y/y prior
- Saxony July CPI +2.7% vs +2.5% y/y prior
- Baden Wuerttemberg June CPI +2.5% vs +2.1% y/y prior
The headline inflation figures here are much higher than in June, which points to an acceleration in price pressures in July. Similar to the Spanish report earlier, the numbers here will only serve to reinforce the narrative that the ECB may very well have to take action after the summer break in September.
Even the monthly readings are running hot with Bavaria recording +0.6%, North Rhine Westphalia +0.9%, Saxony +0.6%, and Baden Wuerttemberg +0.8%.
The German national reading later is expected at 2.7% but based on the figures above, there will be potential upside risks to the figure. I reckon we could see it meet estimates at 2.7% or perhaps come in a little hotter at 2.8%. Nonetheless, that will still be higher than the 2.3% reading recorded in June.
As things stand, traders are pricing in ~65% odds of the ECB hiking rates next in September. But if the inflation trend keeps as it is in the next month, it would be reasonable to see traders move to price in a move at the next meeting rather than in October currently.
This article was written by Justin Low at investinglive.com.