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Germany's states; Saxony, Brandenburg, Hesse, Bavaria, North Rhine Westphalia and Baden Wuerttemberg all released their monthly inflation rates showing continued deflationary pressures, though there is some inflationary pricing in the core, particularly in Saxony to bring a smile to the ECB.

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November followed the October reading witht weakening of inflationary pressures in the German economy. The annual headline reading for the national print is expected at +1.2% y/y. Inflation in the euro area has been continuing to show signs of weakening and the fear is that this will start impacting the core reading as well going into next year. As such, pay attention to the Saxony release once again later in the session.

German Inflation Releases November 28 2019:

  • 0800 GMT - Saxony
  • 0900 GMT - Brandenburg
  • 0900 GMT - Hesse
  • 0900 GMT - Bavaria
  • 0930 GMT - North Rhine Westphalia
  • 1100 GMT - Baden Wuerttemberg
  • 1300 GMT - Germany national preliminary figures

Latest data released by Destatis

Saxony November CPI -0.8%  Prior +0.1%

  • CPI +1.1% y/y Prior +1.0%

A drop in the monthly headline reading but up y/y in November. This should help to reaffirm some decent price pressure still holding up in Germany despite the drop over the last few months. Key is the core reading for policymakers.

Brandenburg November CPI -0.8% vs 0.0% m/m prior

  • Prior 0.0% CPI +1.3% y/y Prior +1.1%

Saxony and Brandenburg here showing a mild increase in annual inflationary pressures but readings in Hesse and Bavaria are more subdued instead. Saxony report had a skew to the core reading which was more positive.

Hesse November CPI -0.8% vs +0.1% m/m prior

  • Prior +0.1% CPI +0.9% y/y Prior +1.2%

Bavaria November CPI -0.8% vs +0.1% m/m prior Prior +0.1% CPI +0.9% y/y Prior +0.9%

North Rhine Westphalia November CPI -0.7% vs +0.1% m/m prior

  • NRW CPI Prior +0.1% CPI +1.2% y/y Prior +1.2%

The annual headline unchanged to October reaffirming steady inflationary pressures paired along with other state readings.

Germany November preliminary CPI -0.8% vs -0.6% m/m expected

  • Prior +0.1% CPI +1.1% vs +1.2% y/y expected Prior +1.1%
  • HICP -0.8% vs -0.7% m/m expected Prior +0.1%
  • HICP +1.2% vs +1.1% y/y expected Prior +0.9%

Annual headline inflation steady with EU-harmonised reading improving the positive takeaway but clearly a long way from anything sustainable towards 2%  to sate the ECB.

Not a surprise on the back of euro depreciation and the low oil price and a current account surplus that increased by more than 1pp in 2015 to 8.5% of GDP, and the resilience of exports to the eurozone in 1H16 has helped offset weaker export demand elsewhere, including from the UK.

Chatter from policymakers is Germany's net external creditor position which is over 17% of GDP , which compares favourably with the 'AAA' median of 10% of GDP. The pressure is to use negative rates and that comfort to stimulate infrastructre. Meanwhile however there is the Deustchbank imposion risk.

Since the Brexit vote, there has been a moderate weakening in confidence indicators, reflecting Germany's exposure to the more uncertain external environment.

Longer term we have seen GDP growth  decelerate to a trend rate under 1.3%, with unfavourable demographics a key headwind. The growth impact of the migrant inflows over the last years a likely to be mildly positive, although it will take time to absorb migrants into the labour force.

Negotiated pay settlements increased so some wage pressures is expected to increase only moderately. HICP is forecast to steadily rise on the back of slightly higher oil prices from 2016 through 2019. 

From The TradersCommunity News Desk

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