German and Spanish Inflation Soar to Records with Consumer Sentiment at All Time Lows Ahead of ECB Meeting

Energy and food pricing pressures continue to elevate around the world. Germany’s consumer inflation for May was 8.7% from a year ago and the highest reading since German reunification. Analysts predicted 8.1%. advance. We already know people’s sentiment continues to suffer; GfK Consumer Climate Indicator for Germany edged up to -26 heading into June of 2022 from a record low of -26.6 in May. Spain’s May CPI also soared to +8.7% y/y vs +8.3% expected. The ECB meet in 10 days where they are set to announce the conclusion of large-scale asset purchases and confirm plans to raise interest rates in July for the first time in more than a decade.

Record Post German Unification CPI via Bloomberg

Germany May 22 preliminary CPI +8.7% vs +8.3% y/y expected

  • German May prelim CPI +7.9% y./y vs +7.6% expected
  • Prior was +7.4% y/y
  • HICP +8.7% y/y vs +8.0% expected
  • Prior HICP 7.8% y/y
  • CPI m/m +0.9% vs +0.5% exp
  • HICP m/m +1.1% vs +0.5% exp
German Monthly CPI

Latest data released by Destatis – 30 May 2022

Germany Finance

German States May CPI

  • Saxony May CPI +8.0% y/y vs +7.2% y/y prior
  • Bavaria May CPI +8.1% y/y vs +7.5% y/y prior
  • Hesse May CPI +8.4% y/y vs +7.9% y/y prior
  • Baden-Wuerttemberg May CPI +7.4% y/y vs +7.0% y/y prior

“Consumers will have to reckon with further increases in prices because many inputs are still scarce and wholesale prices are still increasing dramatically,” ZEW Economist Friedrich Heinemann said by email. “Surprisingly good labor-market data also indicate that the dreaded wage-price spiral could soon pick up speed.”

Negotiated wages in Germany fell by 1.8% in real terms in the first quarter, however workers in the iron and steel industry are pushing for gains of more than 8%, they’re unlikely to secure gains that fully offset the rising cost of living.

Spain May 22 preliminary CPI +8.7% vs +8.3% y/y expected

  • Spain Preliminary CPI +8.7% vs +8.3% y/y expected
  • Prior +8.3%
  • HICP +8.5% vs +8.2% y/y expected
  • Prior +8.3%
Spain Monthly CPI

Latest data released by the National Statistics Institute – 30 May 2022

Spanish inflation continues at an elevated level after surging at the start of the year. Spain inflation at a record 8.5% is despite government assistance including a fuel subsidy and an increase in the minimum wage. On a monthly basis, consumer prices are expected to rise by 0.8 percent, after a 0.2 percent decrease in April.

Core inflation, which strips out volatile food and energy prices, jumped up to 4.9% year-on-year in May, up from 4.4% in April. This was the highest since October of 1995, from 4.4 percent in April. Main upward pressure should come from prices of food & non-alcoholic beverages.

German GfK Consumer Climate Indicator for May 2022

  • Consumer Climate -26 from a record low of -26.6
  • Economic (-9.3 vs -16.4 prior)
  • Income (-23.7 vs -31.1 prior)
  • Propensity (-11.1 vs -10.6 prior)

“Despite further easing of corona-related restrictions, the Ukraine war and above all the high inflation are weighing heavily on consumer sentiment”, Rolf Bürkl, GfK consumer expert said.

Preview Eurozone inflation data due Tuesday 31 May 2022

Euro zone inflation hit a record 7.5% in April. Stripping out energy and food costs still leaves the rate well above the ECB target. The ECB’s deposit rate is currently -0.5%,

Expectations from TD

Euro area headline HICP inflation are for a new series high in May at 7.8%

A rebound in fuel prices and continued acceleration in food inflation likely being the main drivers
EZ core inflation expected to soften 0.1ppts to 3.4% y/y due to weakness in the non-energy industrial goods component

Expectations from CommerzBank

  • Expects a jump from 7.4% to 8.0% in May
  • The decline in energy prices in April did not continue. More had to be paid again for all types of energy in May.
  • y/y rate of change is likely to have risen from 37.5% to 39%. This alone increases the inflation rate in May by 0.15 percentage points.
  • The inflation rate excluding energy, food, alcohol and tobacco is likely to have risen further from 3.5% in April to 3.8% in May
  • The jump in food prices is even greater. Here, the y/y rate is likely to have climbed from 6.3% to 7.3%, which in itself pushes up the inflation rate by 0.2 percentage points.

Source: Destatis, Bloomberg, TC, NSI

From The TradersCommunity Research Desk