BERLIN, July 21 - German consumer price inflation is expected to remain buoyant in July, driven by seasonal price hikes in the leisure industry, with fresh food prices also up after drought ravaged fruit and grain crops throughout Europe. Economists polled by forecast consumer prices will rise by 0.3 percent month-on-month in July, for a year-on-year rate of 1.0 percent, the same inflation rates as in June. Six German states are due to report July consumer price data from Wednesday, with a preliminary figure for the whole country also expected this week.
Together with Italy, which publishes inflation data from 12 major cities on Wednesday, the figures will provide a first glimpse of price trends in the 12-nation euro zone this month. Analysts said strong oil prices recently also drove up inflation in July, with the weakening euro unable to cushion the effect. The single currency has lost around five percent since hitting a high of $1.19 at the end of May. "Oil prices were clearly higher this month than in May and June and the euro has also lost ground so this will have an impact on consumer prices," said Julian von Landesberger, an economist at HVB Group. Food prices are expected to spike up as a result of soaring summer temperatures in large parts of Europe that have damaged fruit, vegetable and grain crops.
"Price pressure will also come from fresh produce this month. Although many varieties that suffered poor harvests are not included in the CPI basket of goods, the prices of products made from these goods, for example bread and jam, will rise and feed into inflation," said HVB's von Landesberger. Germany faces its worst grain harvest in a decade due to the unusual weather conditions, which interest groups say could cost farmers millions of euros. In addition, the tropical temperatures have sent Germans flocking to bars, restaurants and ice-cream parlours for refreshments, creating room for higher-than-usual price rises in these sectors. Bankgesellschaft Berlin said in a research note: "The start of the summer holidays will produce a sharp rise in the prices of package holidays and hotel accommodation. As these developments dominate prices, the index should rise by 0.3 percent on the month."//