Mikkel Rosenvold
36 weeks ago

Analyst: Prices will remain low for German consumers

Ulrik Simmelholt of Steno Research predicts a period of lower core inflation for Germany, pointing towards beneficial conditions for consumers.
SATURN store on February 18,2015 in Wiesbaden,Germany.
Vytautas Kielaitis / Shutterstock.com

Ulrik Simmelholt from Steno Research provides an insightful analysis on the current economic landscape in Germany, indicating that German consumers can expect prices to remain low in the near future.

According to his examination, price expectations in the service sector, excluding real estate, have continued to decline, reaching levels last seen in 2018-19. This trend suggests lower core inflation readings in the latter half of the year.

Conversely, manufacturing price expectations have begun to rebound, aligning with the European Central Bank's (ECB) price stability mandate. Factors such as decreased input costs, the global reflation narrative, and anticipated ECB rate cuts have contributed to this shift.

The juxtaposition of service and manufacturing price expectations raises questions about their respective impacts on inflation in the upcoming seasons.

Additionally, order-to-inventory ratios in Germany, particularly in the chemical sector, have shown improvement due to falling input prices and stable energy prices. However, the overall outlook remains tepid, with sectors like the automotive industry and basic metals continuing to face challenges despite some signs of reflation.

High-frequency indicators present a mixed picture, with electricity consumption declining on a year-to-year basis, while truck toll mileage shows slight improvement.

This divergence casts doubt on the ongoing cyclical repricing of European equities and suggests potential adjustments in investment strategies, including considering short positions in German equities.

Finally, despite some sectors like chemicals showing signs of recovery, the broader IFO report does not support a strong reflation narrative for Germany. Simmelholt interprets these indicators as signs of impending sub-target inflation in the Eurozone, reinforcing the outlook of sustained low prices for German consumers.

Disclaimer

The information provided by this Site is for general informational purposes only. All information on the Site is provided in good faith, however we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability or completeness of any information on the Site.

More News

24 weeks ago Analysis: New Debate Rules Favor Biden New rules announced for the June 27th debate between Joe Biden and Donald Trump serves the President well.
24 weeks ago StanChart Becomes Among the First Global Banks to Launch Spot Crypto Trading StanChart breaks new ground by launching spot trading for Bitcoin and Ether, leading the charge among global banks in the cryptocurrency space.
24 weeks ago Crypto, Currently: June 21, 2024 - Market Bears Down on Major Cryptos Daily update on the five cryptocurrencies, we consider the most interesting right now.
24 weeks ago FX Daily: June 21, 2024 – Forex Market Update Daily update from the foreign exchange markets.
24 weeks ago Amazon Plans To Make Largest Reduction of Plastic Packaging in North America To Date Amazon's response to mounting criticism over its plastic waste with a new reduction plan.
24 weeks ago Ex-OpenAI Chief Scientist Ilya Sutskever Launches New Company Amid Criticism of ChatGPT Parent's Board Appointments Ilya Sutskever, former chief scientist at OpenAI, has co-founded a new company, Safe Superintelligence Inc., amidst ongoing scrutiny of OpenAI’s recent board appointments.
24 weeks ago FX Daily: June 20, 2024 - Mixed Movements in Global Currency Markets Daily update from the foreign exchange markets.