German inflation eases on one-offs, eurozone morale mixed

BERLIN (Reuters) - German inflation dipped against expectations in June, data showed on Wednesday, but economists said one-off effects were largely behind the fall and warned against seeing it as an early end to price pressures.

The figures came after a separate European Commission survey showed economic sentiment in the 19 countries sharing the euro was slightly more robust than forecast thanks to improving morale in the industrial and services sectors.

German consumer prices, harmonised to make them comparable with data from other European Union countries (HICP), came in at 8.2% on the year, the Federal Statistical Office said. That was below May's 8.7% and an 8.8% consensus forecast in a Reuters poll.

The headline, non-harmonised inflation figure came in at 7.6%, below the previous month's 7.9%.

It was the first month that included the impact of government measures to dampen high fuel prices and other factors including a drop in oil prices and a scheme offering subsidised public transport travel around Germany.

"Let's not be fooled by this," DekaBank chief economist Ulrich Kater said, noting the impact of one-offs.

"You can't get away from the fact that by year-end the inflation rate in Germany will still be over 7%," he said, forecasting no letup until early next year.

Bond markets were little moved by the data. All eyes now are on Friday's first estimate of June inflation for the euro zone as a whole and what impact that will have on European Central Bank (ECB) policy, where a 25-basis point rate hike is already baked in for its next meeting on July 21.

Data from Spain, meanwhile, showed that 12-month inflation jumped to 10.2% in June, the first time it surpassed 10% since April 1985, from 8.7% the previous month.

Central banks across the world are seeking to cap inflationary pressures brought on by higher energy prices, supply chain snags and pandemic-era support packages without sending their economies into recession.

Earlier the European Commission's monthly sentiment survey showed eurozone economic sentiment slipped to 104.0 in June from 105.0 in May, still better than a reading of 103.0 expected by economists polled by Reuters.

Sentiment in industry improved to 7.4 points from 6.5 in May and for services, the economy's biggest sector, to 14.8 from 14.1 in May. Economists had expected both to decline.

Manufacturers were more bullish about future production and order books, but less so on employment and saw greater overall uncertainty. The service sector was more upbeat about business over the past three months, but less optimistic looking forward.

Consumer confidence slipped to -23.6 from -21.2 and retail trade sentiment to -5.1 from -4.2. Households had a more pessimistic view on the economy over the past and coming year as well as their prospects of making major purchases and savings.

(Reporting by Miranda Murray and Rene Wagner in Berlin; Philip Blenkinsop in Brussels; writing by Mark John; Editing by Tomasz Janowski)