German CPI falls back in May, but core pressures building according to analysts

The cost of living in the euro area's largest economy fell back last month as the impact of the late Easter in 2017 reversed, revised data confirmed.

In May, consumer prices in Germany advanced at a 1.5% year-on-year pace, according to the country's Finance ministry, and declined by 0.2% in comparison to the previous month.

Leisure price inflation slowed from a rate of 3.3% in April to 0.8% for May as the cost of package holidays and airfares decreased. Energy price inflation also came down.

Headline CPI had risen to a rate of 2.0% in April after rising by 1.6% in March.

The harmonised consumer price index for May was also down by 0.2% on the month, with the annual rate of price increases slipping to 1.4%, as economists had forecast.

However, price pressures were building at the core level, Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics said.

"Net rent inflation is now soaring, rising to a record high of 1.9%, from 1.8% in April. This component is 20% of the total CPI, and it signals that underlying core inflation pressures are rising gradually. We think the core rate will increase slightly to 1.5%-to-1.6% at the end of the year from its current 1.3%."