fundamental alert

German Inflation Drops to 2.5% as Oil Tumble Lower

Friday, 14 November 2008 06:15:55 GMT  |  DailyFX Research

German October HICP inflation was confirmed at 2.5% y/y, in line with the preliminary number and down from 3.0% y/y in September. Prices fell 0.3% over the month. National CPI was down 0.2% m/m, bringing the annual rate down to 2.4% y/y from 2.9% y/y in September. The sharp deceleration in the headline rate is due to lower oil prices and positive base effects, with transport prices, which include petrol, down 2.1% m/m in October. The annual rate decelerated to 2.3% y/y from 4.4% y/y. Base effects also brought annual food price inflation down to 4.3% y/y from 6.1% y/y in the previous month. Inflation has peaked and is coming down quicker than previously hoped for. However, at 2.5% y/y the HICP rate remains above the ECB's upper limit for price stability and recent wage deals indicate that there are still risks from wage inflation, despite rapidly slowing growth.
Meanwhile, Euro-Zone car registrations dropped 13.8% y/y in October. Registrations fell an average of 5.3% y/y in the first ten months of the year. The contraction was led by rapidly slowing demand in countries that are struggling with a collapsing housing market such as Ireland, where registrations dropped 54.6% y/y in October, and Spain, where registrations declined 40.0% y/y that month. This highlights the impact developments have on consumption and ultimately overall growth. The automobile industry is clearly feeling the strain from the economic slowdown and one of the sectors most under pressure.

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