August inflation readings rise across German states

State-level inflation data for August, released around the same time, show higher prints:

• Bavaria's August CPI stood at +2.9% year-on-year, compared with +2.8% previously
• Saxony saw August CPI at +2.9% y/y, up from +2.7% prior
• North Rhine Westphalia recorded August CPI of +2.9% y/y, versus +2.7% before
• Baden Wuerttemberg's August CPI was +2.6% y/y, after +2.5% earlier

Monthly figures also point to stronger gains after July's sharp increase:

• Bavaria's August CPI rose +0.2% month-on-month
• Saxony's August CPI gained +0.2% m/m
• North Rhine Westphalia's August CPI increased +0.2% m/m
• Baden Wuerttemberg's August CPI edged up +0.1% m/m

These numbers continue to indicate that price pressures are broadening, rather than being mostly driven by base effects.

Given these estimates, the overall German national print for August is expected to come in later at roughly 2.9% or 3.0% (rounded up), which aligns with estimates of 2.95% (3.0%).

While this does not alter the outlook for the European Central Bank going into September, it does strengthen the view that the central bank needs to adjust its positioning. The ECB is prepared to raise key interest rates once more in order to bring monetary policy to a mildly restrictive stance.

That is to ready itself for the fight against inflation and any second-round effects that could appear late this year or early next year.