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Financial News: German Inflation Slows More Than Expected; Retail Sales

German Inflation Slows More Than Expected; Retail Sales Rebound

05/31/2019 - 09:13:00 (RTTNews)

(RTTNews) - Germany's inflation slowed sharply in May and at a faster-than-expected pace, as food price growth remained sluggish and services cost increases were weaker, preliminary data from the Federal Statistical Office showed on Friday.

Data released earlier in the day showed that retail sales rebounded in April from last year, driven by the timing of Easter.

The consumer price index rose 1.4 percent year-on-year in May after a 2 percent increase in April, which was the fastest in five months. Economists had forecast price growth of 1.6 percent. In March, inflation was 1.3 percent. Retail sales rebounded at a faster-than-expected pace of 4 percent annually in April, reversing a 2 percent fall in March. Sales were forecast to grow moderately by 1.3 percent.

The timing of Easter had a positive effect on the year-on-year development of turnover in April, Destatis said.

Elsewhere, energy inflation slowed to 4.2 percent in May from 4.6 percent, while food price growth climbed to 0.9 percent from 0.8 percent. Services costs grew 1.2 percent year-on-year following a 2.1 percent increase in the previous month. Meanwhile, retail sales fell 2 percent month-on-month in April, after staying flat in March. This was the first decrease in four months. Economists had forecast a 0.1 percent rise.

On a month-on-month basis, prices increased 0.2 percent after a 1 percent rise in April. Economists had forecast monthly price growth of 0.3 percent. The monthly increase is the weakest in four months. The harmonized index of consumer prices, or HICP, which is meant for EU comparison, rose 1.3 percent year-on-year following a 2.1 percent increase in April. HICP inflation was the lowest since April last year, when it was 1.3 percent. Compared to the previous month, the HICP rose 0.3 percent in May.

Destatis is set to release the final figures for May inflation on June 13.

The inflation data from the biggest euro area economy came as the European Central Bank prepares to hold its its next policy session on June 6. "Leaving the Easter Bunny fluctuation aside, today's inflation data show that core inflation in the Eurozone is still moving sideways and actually has been doing so since 2015," ING economist Carsten Brzeski said. "The ECB's hope that headline inflation would move towards the ECB's medium-term aim is increasingly being derailed rather than delayed."

Brzeski expects the ECB to stick to its current easing bias and added that additional easing measures over the summer should not be ruled out.

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