The German CPI Prelim m/m, or the preliminary change of the German CPI on a monthly basis, refers to the percentage change in the price of a basket of goods and services in Germany from the previous month, as reported by the Federal Statistical Office of Germany. It is a crucial economic indicator that reflects inflationary pressures in the German economy. This data is closely monitored by policy makers, economists, investors and businesses to gauge the state of the economy and make informed decisions regarding monetary policy, investment strategies and business planning.
Preliminary German Consumer Price Index (CPI) data on a monthly basis (M/M) could influence the euro as it provides insight into inflationary pressures within the euro zone’s largest economy.
If Germany’s preliminary CPI M/M comes in higher than expected, indicating rising inflationary pressures, it could lead to speculation that the European Central Bank (ECB) may tighten monetary policy sooner than expected to curb inflation. In response, investors may buy the euro in anticipation of a potential rise in interest rates, which could increase the value of the currency.
Conversely, if the German CPI M/M is lower than expected, this could indicate weak inflationary pressures. In this scenario, investors may sell the euro because they see a lower likelihood of near-term monetary policy tightening by the European Central Bank, which could weaken the currency.
However, it is necessary to consider other economic indicators, the stance of monetary policy, and broader market sentiment as well, as they can also affect the value of the euro. In addition, the euro’s reaction to economic data releases can vary depending on the overall market context and investor sentiment at the time of release.
Effects of lower German CPI on the market
The release of preliminary German Consumer Price Index (CPI) data on a monthly basis (M/M) below expectations could have several effects:
Market reaction: If the CPI number is lower than expected, it could cause the value of the euro to fall against other currencies, at least temporarily. This reaction is because lower inflation may signal weaker economic activity or potential deflationary pressures, which could prompt investors to sell the euro.
Monetary policy implications: Central banks, such as the European Central Bank (ECB), closely monitor inflation data such as the CPI when making monetary policy decisions. A lower-than-expected CPI number may signal to policymakers that more monetary stimulus is needed to stimulate economic growth and boost inflation toward the central bank’s target.
Consumer Behavior: Low inflation can affect consumer behavior. Consumers may delay purchases if they expect prices will continue to fall, resulting in reduced consumer spending. On the other hand, lower inflation can increase purchasing power if wages remain stable or increase, which can boost consumer confidence and spending.
Business Planning: Companies also closely monitor inflation data when making decisions about pricing, investment, and hiring. Lower than expected inflation could impact their pricing strategies, which could lead to lower profit margins or adjustments in production levels.
Overall, while a lower-than-expected CPI release can have immediate effects on currency markets and investor sentiment, its longer-term impact depends on how it aligns with broader economic trends and expectations for future inflation. Since the weight of housing is much smaller in the HICP basket, price increases in other product groups have a greater impact on the HICP than on the CPI.
Inflation and consumer prices in Germany for April 2024
Consumer Price Index April 2024:
+2.2% over the same month of the previous year (temporary) +0.5% over the previous month (temporary)
Germany’s inflation rate reached +2.2% in April 2024. The inflation rate is measured as the change in the consumer price index compared to the same month of the previous year. Based on the results available so far, the Federal Statistical Office (Destatis) also reported a rise in consumer prices of 0.5% in March 2024. The inflation rate excluding food and energy, often referred to as core inflation, is expected to be as expected. +3.0%.
Energy prices in April 2024 were 1.2% lower than in the same month of the previous year despite the cessation of energy price caps from January 2024, and the introduction of a higher carbon price also from January 2024, affecting the price of fossil fuels. such as motor fuel, heating oil and natural gas, and the temporary reduction in VAT (from 19 to 7 percent) on gas and district heating expires in April 2024. As a result, energy prices have once again fallen significantly below the general rate of inflation.
Inflation calculator for personal inflation rate:
Consumers can use the Personal Inflation Calculator (in German only) of the Federal Statistical Office to adapt their monthly consumption spending on individual product groups according to their consumption patterns and calculate their personal inflation rate.
The Consumer Price Index (CPI) and the Harmonized Index of Consumer Prices (HICP) differ in coverage and methodology. In contrast to the HICP, the CPI also includes household spending on owner-occupied housing, games of chance, and broadcast fees. In addition, the HICP product weights are updated annually and historical data are generally not revised (in German only).
Inflation rate and consumer prices in Germany for May 2024
Consumer Price Index May 2024:
+2.4% over the same month of the previous year (temporary) +0.1% over the previous month (temporary)
Unified Consumer Price Index May 2024:
+2.8% over the same month of the previous year (temporary) +0.2% over the previous month (temporary)
Germany’s inflation rate reached +2.4% in May 2024. The inflation rate is measured as the change in the consumer price index compared to the same month of the previous year. Based on the results available so far, the Federal Statistical Office (Destatis) also reported consumer prices rising by 0.1% in April 2024. The inflation rate excluding food and energy, often referred to as core inflation, is expected to be low. +3.0%.
Energy prices in May 2024 were again lower than in the same month of the previous year (-1.1%) despite the cessation of energy price capping and the simultaneous introduction of a higher carbon price at the beginning of 2024, and the end of the year. Temporary reduction of VAT on gas and central heating in April 2024. The increase in food prices (+0.6%) was also again significantly lower than the overall rate of price increase. On the other hand, service prices increased by 3.9% in May 2024 compared to May 2023.
