*
Harmonised inflation fell to 7.6% in April vs. 7.8% in
March
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Energy prices still easing, food prices post first monthly
drop
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Economists warn core inflation will remain high
(Adds economists comments and inflation forecasts)
By Maria Martinez
BERLIN, April 28 (Reuters) - German consumer prices in
April posted their smallest increase since the start of the war
in Ukraine, as energy prices eased further and food prices began
to fall.
Consumer prices, harmonised to compare with other European Union countries, rose by 7.6% on the year in April, preliminary data from the federal statistics office showed on Friday. This was the lowest year-on-year reading since March 2022. Analysts had expected harmonised annual inflation to remain unchanged from March at 7.8%. Month-on-month, harmonised consumer prices rose 0.6%, the data showed.
The rise in energy prices - up 6.8% in April - was again milder than the overall inflation index, as was the case in March, showing a downward trend in energy prices.
A base effect explained part of that easing: the index was at a high in April 2022 after energy prices soared following the Russian invasion of Ukraine, so the year-on-year comparison was smaller. In addition, German government relief measures were also contributing to the current easing of energy prices, the statistics office said.
Food prices in April continued to show above-average growth, posting a 17.2% year-on-year increase. However, they fell month-on-month for the first time since October 2021, Commerzbank senior economist Ralph Solveen said.
"After the inflation rate for energy already peaked in
September, this now also appears to be the case for food,"
Solveen said.
For Solveen, April's figures support the expectation
that the inflation rate will continue to decline in the coming
months.
Inflation is forecast to fall to 5.9% in 2023 and 2.7% in 2024, according to the spring
economic projections of the German government published on Wednesday.
Despite the downward path expected for headline
inflation, there are still challenges ahead.
"What looks like a broader disinflationary process is
still only disinflation on the back of base effects," ING's
global head of macro Carsten Brzeski said, adding that core
inflation, which excludes food and energy due to their price
volatility, remains high.
Germany's labour market is so tight that workers have gained bargaining power in wage negotiations and wage growth could perpetuate inflation. The seasonally-adjusted
jobless rate
remained stable at 5.6% in April, labour market data showed
on Friday.
"Recent wage settlements and still decent pipeline
pressure in services are likely to keep core inflation high,"
Brzeski said.
(Reporting by Maria Martinez, Rachel More and Miranda Murray;
Editing by Toby Chopra)
