News

By Maria Martinez

BERLIN (Reuters) -Inflation fell in six important German states in August due to lower energy prices, preliminary data showed on Thursday, suggesting Germany's national inflation rate could decline noticeably this month.

In Saxony, the inflation rate fell in August to 2.6% from 3.1% in the previous month, in Brandenburg it fell to 1.7% from 2.6%, in Baden-Wuerttemberg it fell to 1.5% from 2.1%, in Hesse it fell to 1.5% from 1.8% and in Bavaria it fell to 2.1% in August from 2.5% in July.

The inflation rate in North Rhine-Westphalia, Germany's most populous state, fell to 1.7% in August from 2.3% in July.

Economists polled by Reuters forecast a harmonised national inflation rate in Germany - the euro zone's largest economy - of 2.3% in August, down from 2.6% the previous month. National figures will be released later on Thursday.

The inflation data from the states indicate German inflation has fallen more sharply than previously expected, said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, noting that North Rhine-Westphalia accounts for 21% of total inflation.

"That sounds like a good result," de la Rubia said. "From now on, however, things are unfortunately on the up again."

In the next six to twelve months, the inflation rate is likely to move back towards 3%, de la Rubia forecasts.

The German data comes ahead of the euro zone inflation release on Friday. Inflation in the bloc is expected at 2.2% in August, down from 2.6% in the previous month, according to economists polled by Reuters.

"Any downside miss in August inflation data is likely to raise expectations for an October (ECB) rate cut," economists at Nomura said.

The rising likelihood of a German recession and contraction in euro area domestic demand also raise the chance of an October rate cut by the European Central Bank, the economists added.

Fewer companies in Germany are looking to raise their prices in August, according to an Ifo survey published on Thursday.

"Overall, the inflation rate in the coming months is likely to remain below the 2% mark targeted by the ECB," said Timo Wollmershaeuser, head of forecasts at Ifo. Energy in particular is significantly cheaper for consumers than it was a year ago, he noted.

However, Ifo expects core inflation to remain largely unchanged for the time being at around 2.6%, above the ECB’s inflation target.