Harmonized inflation falls in June

Harmonized inflation dropped to 2.5% in June, following May’s 2.8%. The result matched the Euro area average and had been priced in by markets. The moderation chiefly reflected reduced price pressures recorded for transportation, which outweighed faster price growth for food plus housing and utilities. Annual average harmonized inflation fell to 3.5% in June (May: 3.8%). Meanwhile, consumer price inflation fell to 2.2% in June from May’s 2.4%. Finally, harmonized consumer prices rose 0.15% over the previous month in June, a smaller increase than the 0.23% rise seen in May. June's result marked the weakest reading since January.

ING’s Carsten Brzeski commented: “Looking ahead, the stickiness of inflation at slightly too high a level looks set to continue as favourable energy base effects are petering out while, at the same time, wages are increasing. With recent new wage demands, it is hard to see German wage growth coming down in the second half of the year. As a result, we continue seeing inflation hovering within the broader range of between 2% and 3% rather than returning on a straight line to 2%.”

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