German headline inflation rate falls below zero in July, likely to return to positive territory in August
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German inflation surprisingly accelerates in June on recovery in oil prices, likely to slowdown in H2 2020
The German inflation rate surprisingly accelerated to 0.9 percent in June from May’s 0.6 percent, as compared with expectations of 0.6 percent. After the rebound of oil prices since April end, energy prices dropped markedly less sharply than in May, falling at a pace of 6.2 percent as compared with May’s decline of 8.5 percent. Meanwhile, the core inflation rate is expected to have risen slightly to 1.5 percent from 1.4 percent.
In the course of the reopenings in the service and leisure sector, several prices were raised. Some state statistical offices record considerable rises in price for hairdressing and other beauty services, while overnight stays and restaurant services have also become markedly more expensive.
Meanwhile, inflation is likely to come in considerably lower in the second half of 2020 in view of the temporary reduction in VAT, noted Commerzbank in a research report.
“Experience from the financial crisis in 2008/09 shows that companies are only partially passing on the lower VAT to consumers. However, this should be enough to push the inflation rate close to zero in July. In the course of the summer and autumn, it should then be somewhat higher again due to an expected increase in the price of oil”, added Commerzbank.