German headline inflation eases in April on sharp fall in energy prices

German inflation eased in April to 0.8 percent from prior month’s 1.4 percent. Consensus expectations were for 0.7 percent. The fall was mainly driven by a year-on-year decline of 5.8 percent in energy prices, owing to the oil price slump. On the contrary, food, especially fresh fruit and vegetables, markedly rose 4.8 percent year-on-year.

“According to our estimates based on the results of the state statistical offices, the core inflation rate (excluding energy and food) should have fallen from 1.5 percent to 1.2 percent”, said Commerzbank in a research report.

Nevertheless, measuring underlying inflation is at present subject to significant uncertainty. This is because statisticians are not able to collect prices for several goods and services due to restrictions amidst the corona crisis. Thus, temporarily unobservable prices are extrapolated, for instance the price development of similar products.

“At the European level the prices for April are subject to same problems. We expect the inflation rate to fall from 0.7 percent to 0.0 percent. The core inflation rate - i.e. the previous year's rate of change in the consumer price index excluding energy, food and beverages - should remain at 1.0 percent”, added Commerzbank.