Weak German inflation may lead to ECB money supply
GERMANY saw flat inflation in August and this could feed into a European Central Bank (ECB) decision to deploy more monetary stimulus as soon as next week.
Preliminary figures from Germany’s federal statistics office Destatis showed that inflation remained steady at 0.4 percent last month, the same as in July, as measured using the consumer price index preferred by the German government.
The result was just below the 0.5pc predicted by analysts surveyed by Factset, and remains far off the ECB target of just under 2pc.
Using the Harmonised Index of Consumer Prices (HICP) barometer preferred by the European Central Bank, inflation stood at 0.3pc in August, slightly lower than July’s 0.4pc.
“While inflation should pick up in the coming months, we do not think that it is on track to reach the ECB’s near-2.0 percent target on a sustained basis,” Jack Allen of Capital Economics wrote.
Mixed expectations for economic growth visible in recent surveys of German businesses and investors and low inflation expectations among consumers all point to price growth peaking in the coming months before falling back, he added.
Meanwhile, inflation is “far weaker elsewhere” in the eurozone, Mr Allen noted, pointing especially at Spain, which released data showing headline inflation remains negative.
ECB governors are set to meet on September 8 for the second time since Britain voted to quit the EU in late June. The bank’s board will have more hard economic data and their own staff projections to work from in September.
The inflation data was a preliminary flash estimate based on consumer price data for six of Germany’s 16 regional states. – SWEDISH furniture flatpack giant Ikea warned it could delay planned investment in Russia after a court ordered it to pay more than US$7.8 million in damages in a long-running legal dispute.
Ikea said it had plans to invest more than 100 billion rubles (US$1.54 billion) in Russia but “recent activities related to old legal cases could slow down these investment plans”.
Ikea stressed it did not plan to cut its investment in Russia but said its legal problems “could slow down” its plans.
It issued the statement after a court in the western Russian city of Smolensk ordered Ikea to pay more than 507 million rubles to Russian businessman Konstantin Ponomaryov as part of a decadelong wrangle over supplying power to stores in the second city of Saint Petersburg.
The case is one of numerous cases launched in Russia against Ikea including over the ownership of the land where its national headquarters is based on the edge of Moscow.
The furniture chain, which has 14 stores in Russia, said it wants to work in a “fair and transparent business climate” and accused its opponents of attempting “to use illegal methods to extract further money from the company”.
IKEA, which has been working in Russia since 2000, has said it has paid more than 60 billion rubles in taxes in five years and has created more than 12,000 jobs.
The group is also mired in a dispute over the legality of its purchase of land on the edge of Moscow where it built a shopping centre. Its offices have been searched numerous times.
According to a recent investigation by Russia’s Dengi magazine, Ikea is involved in 500 legal cases – more than any other company in the country. –