German Inflation Unexpectedly Accelerates on Holidays

The rate of inflation in Germany, Europe’s largest economy, unexpectedly increased in July due to higher energy and holiday costs and exceeded the European Central Bank’s inflation limit for a fifth month.

“We haven’t seen the peak in annual inflation rates yet, there’s more to come” said Joerg Lueschow, an economist at WestLB in Dusseldorf. “Due to rapid money-supply growth and increased energy costs the ECB’s concern about inflationary pressures certainly won’t abate.”
A rebound in oil prices since mid-January may push up inflation in the 13 euro nations as stronger economic growth and faster hiring give companies room to pass on higher costs. Oil traded at $75.36 a barrel today, up from $50.48 on Jan. 18, close to its record of $78.40 a barrel set in July last year.

Still, the euro’s 7.9 percent gain against the dollar over the past year is helping to cushion the impact of rising oil prices by making imported goods more affordable. The single currency traded at $1.3637 today.

The ECB has said it’s concerned about higher energy costs and that workers will push through higher wages. Some unions have already used faster economic growth to win pay increases. Railway workers this week won a 4.5 percent raise, the biggest since World War II.

Bloomberg