German Inflation Unexpectedly Remained Unchanged in July

German inflation unexpectedly remained unchanged in July at the highest level in five months.

Germany’s consumer price index, calculated using a harmonized European Union method, rose 1.9 percent from a year ago, the Federal Statistics Office in Wiesbaden said today. That exceeds economists’ forecasts for a slowdown to 1.8 percent, according to the median of 24 estimates in a Bloomberg News survey. Prices increased 0.4 percent from June.

“Prices rose a bit more than expected but overall, everything is still under control,” said Heinrich Bayer, an economist at Deutsche Postbank AG in Bonn. “The increase is typical for the season, if you keep travel costs in mind. Overall, the price climate is rather calm, without any drivers, except food prices.”

Food-price inflation accelerated to 5.7 percent in July from 5.4 percent in June, the statistics office said. Energy costs rose 2.9 percent from a year earlier, down from 3 percent in June.

The Bundesbank forecasts German inflation will average 1.6 percent this year and 1.5 percent in 2014. The Frankfurt-based central bank reduced its 2013 growth projection for Germany last month to 0.3 percent from the 0.4 percent it predicted in December, citing a worse-than-expected first quarter and warned that Europe’s sovereign debt crisis still poses risks to the economic recovery.

Euro-Area Inflation

German non-harmonized inflation accelerated to 1.9 percent in July from 1.8 percent, with prices rising 0.5 percent from June.

Consumer price gains in the 17-nation euro area accelerated to 1.6 percent in June from 1.4 percent the previous month and 1.2 percent in April as energy prices rebounded, data from the European Union’s statistics office in Luxembourg showed July 16. Data for this month will be published on July 31. The European Central Bank last month cut its 2013 inflation forecast for the region to 1.4 percent from 1.6 percent and left the 2014 estimate unchanged at 1.3 percent.

Of 63 economists in a Bloomberg News survey, 62 expect the ECB to keep its benchmark interest rate at a record low of 0.5 percent when policy makers meet this week in Frankfurt. ECB President Mario Draghi pledged on July 4 to keep rates low for an “extended period of time” as the currency bloc tries to emerge from its longest-ever recession. The economy shrank for a sixth quarter in the first three months of this year.

(Corrects to show non-harmonized inflation accelerated in sixth paragraph.)
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