Inflation in three German states crept up in May 2024, preliminary data indicates that price growth did decrease in one state, indicating a possible slight increase in national inflation in the largest economy in Europe.
Since Germany releases its numbers ahead of the anticipated release of eurozone inflation data, economists will be closely monitoring the national data later.
Germany’s most populous state, North Rhine-Westphalia, saw an increase in inflation from 2% in April to 2.5% in May. The rate also increased to 2.7% in Bavaria from 2.5%, and to 3.1% in Saxony from 2.7%.
However, the results were contradictory; in Brandenburg, the rate slightly decreased from 3% to 2%. The rates in Hesse and Baden-Wuerttemberg remained unchanged at 1% and 2%, respectively.
Germany’s harmonised inflation rate is expected to increase from 2.4% in April to 2.7% in May, according to Reuters economists surveyed.
According to economists, a one-time effect of a low-cost national railway ticket scheme that was introduced in May 2023 and has reduced the cost of public transportation over the past year is partially to blame for the anticipated increase.
According to Reuters polled economists, eurozone inflation is predicted to slightly increase to 2.5% in May from 2.4% the month before.
The European Central Bank will be closely examining that number as it appears likely to cut interest rates the following week following the longest-ever run of rate hikes that reduced inflation to slightly above its 2% target.
The duration and extent of future cuts, according to policymakers, will depend on how long lower inflation lasts.
Consumers in the Eurozone decreased their expectations for inflation in April 2024, according to the ECB survey.
Data from Germany has indicated that the country’s economy is doing better than expected. In the first three months of 2024, real wages increased by a record 3.8%, while consumer sentiment had improved for the fourth consecutive month going into June.