Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Germany's State Inflation Falls as Rail Giveaway, Fuel Tax Cut Take Effect

Published 29/06/2022, 08:02
© Reuters.
DE2YT=RR
-
DE10YT=RR
-

By Geoffrey Smith

Investing.com -- Inflation in Europe's largest economy is likely to have slowed in June after government measures to cut fuel prices and rail tickets took effect,

The state of North Rhine-Westphalia, Germany's largest state by population, said consumer prices fell by 0.1% on the month in June, bringing the annual rate of inflation down to 7.5% from 8.1%. That was the first drop in the annual rate since January and fostered hopes that headline inflation may be peaking in Germany and, by extension, across the Eurozone. Germany's CPI rose by 8.0% on the year through May, and by 8.8% according to the EU's harmonized method.

Elsewhere in the Eurozone, the situation was less encouraging: inflation data for Spain, showed price increases accelerating to 1.8% under the harmonized method, taking annual inflation to a new 30-year high of 10.0%.

The introduction of the so-called 9-euro ticket on German railways reduced the price of combined passenger travel by 69% on the month and 68.4% on the year. By the same token, motor fuel prices fell by 3.3% from May after the government cut the tax on gasoline in an effort to bring down prices. That tax cut is limited to three months.

As such, neither of the factors behind the drop reflects a sustained improvement in underlying price dynamics. These continued to show a broadly rising trend, with rents rising 0.2%, and restaurant and hotel costs rising 1.2%. Package tour prices rose over 16%, reflecting the seasonal rise in demand.

The state of Bavaria later also reported a slight drop in annual inflation, to 7.9% from 8.1%. However, underlying pressures were more visible, with monthly inflation still running at 0.2%. Other major German states are due to report their CPI numbers in the course of the morning. A preliminary figure for Germany as a whole will be published at 8 AM ET (1200 GMT).

German bonds rallied sharply on the news, despite the somewhat superficial nature of the apparent improvement. By 2:45 AM ET, the yield on the interest-rate-sensitive 2-year German note was down 11 basis points at 0.84%, while the 10-year benchmark was down 9 basis points at 1.55%.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.