Inflation Rise in Germany

Inflation remained at a low level in Germany, but has increased by 0.3% in  May month on month, and there was a 0.1% increase in the annual rate of inflation when comparing May to the same month a year ago.

A steep year on year fall in energy prices in May by 7.9% was the one of the main reasons for downward pressures on then inflation rate, as has been the case in previous months.

The price of heating oil declined by a considerable 25%, while mineral oil prices fell by 14.9%, and motor fuels by 12%.

Charges for central heating and gas also went down by 9.2% and 2.6% respectively.

Only the electricity prices were higher than in the same month of the previous year, with an increase of 0.9%.

Excluding energy prices, the inflation rate in May 2016 would have been a plus of 1.2%, and overall year on year price reductions eased.

Food prices remained stable for May compared to a year ago, which is in contrast to the level of food prices in recent months, which has pulled up inflation rates.

In April 2016, the rate of food price increase had been an increase of 0.5%.

The price of services did hike in May compared to a year ago by 1.2%, this development was mainly due to 1.1%  moderate movement of net rents exclusive of heating expenses, on which households are estimated to spend a fifth of their consumption expenditure.

There was also a marked increase in the price of some services, such as recreational sporting services and  insurance.

UK Construction Output Boost

 The UK construction industry has expanded by 2.5% in April in contrast to the previous month.

The largest surge in business came from the fresh projects, where there was a 2.5% increase, while maintenance climbed up by 1.9%.

When compared to April in 2015, the news was not so welcome, as the sector contracted  by 3.7%.

In the first quarter of this year, construction also decreased compared to the final three months of 2015 by 2.1%.

While new orders prompted a rise in construction activity month on month, they also fell in the first quarter of this year by 1.2%.

Industrial investment is likely to be harmed by the risk of the UK leaving the European Union, where the likely outcome is damage to the sector’s second quarter figures.

Pound Makes no Major Gains Against Dollar

The pound has failed to make any significant gains on the US dollar, despite encouraging data on a fall in the trade deficit, and solid industrial and manufacturing production.

Against the euro, the pound increased it strength yesterday which spilled into today, peaking at buying just over 1.28 euros.

Analyst Daniel Wray in his daily report for FC Exchange wrote that some investors are suggesting that sterling’s strength we saw yesterday against the euro, was triggered by euro weakness opposed to any direct sterling strength.

This was due to news filtering into the market that German bond yields were falling towards record lows, once again showing both local and global investors are low on confidence and unwilling to take on risk.

Uncertainty over the European Union referendum will also continue to cast a shadow over the pound, until the results are revealed on 24 June.