Germany, News: Preliminary data revealed a slight uptick in inflation in three German states in May, indicating a potential increase in national inflation in Europe’s largest economy, though one state did see a decrease in price growth.
Economists are closely monitoring the national data to be released later on Wednesday, as Germany unveils its figures ahead of the expected euro zone inflation data release on Friday.
In May, the inflation rate in North Rhine-Westphalia, Germany’s most populous state, climbed to 2.5% year-on-year from 2.3% in April. Similarly, Bavaria saw an increase to 2.7% from 2.5%, while Saxony rose to 3.1% from 2.7%. However, in Brandenburg, the rate dipped to 2.9% from 3.0%. Hesse and Baden-Wuerttemberg remained unchanged at 1.9% and 2.1%, respectively.
Economists surveyed by Reuters predict Germany’s harmonized inflation rate to reach 2.7% in May, up from 2.4% in April. This expected rise is partly attributed to the conclusion of a one-off effect from a discounted national railway ticket scheme introduced in May 2023, which had reduced public transport prices over the past year.
Euro zone inflation is also anticipated to rise to 2.5% in May from 2.4% the previous month. The European Central Bank is closely monitoring this figure as it considers lowering interest rates next week following a series of hikes that brought inflation just above its 2% target. However, policymakers emphasize that the pace and extent of further reductions will depend on the sustainability of lower inflation.
A recent ECB survey showed that euro zone consumers lowered their inflation expectations last month. Meanwhile, in Germany, data suggests a more optimistic economic outlook, with consumer sentiment rebounding for the fourth consecutive month heading into June and real wages increasing by a record 3.8% in the first quarter of 2024.
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