Baden-Wuerttemberg CPI

November: -0.2% m/m, +0.4% y/y October: +0.2% m/m, +0.1% y/y

Pan-German CPI

MNI median forecast: -0.1% m/m, +0.4% y/y MNI forecast range: -0.2% to flat m/m

October: +0.1% m/m, flat y/y

BERLIN (MNI) - Consumer prices in the western German state of Baden-Wuerttemberg fell by 0.2% in November, lifting the annual rate to +0.4% from +0.1% in October, the state statistics office said Thursday.

The monthly rise was below the -0.1% median forecast for pan-German CPI in a MNI survey of analysts. North Rhine-Westphalia also posted a monthly price decline of 0.2%, while Bavaria, Saxony, Brandenburg and Hesse earlier today all posted -0.1%.

As in the other states, the strongest downward pressure on monthly consumer prices in Baden-Wuerttemberg came from heating oil costs, which contracted 2.2%, leaving household energy 0.7% cheaper compared to October. Clothing and shoes were also cheaper, with prices falling 1.7%.

Conversely, transport costs rose 0.4% since October, while education was 0.6% more expensive.

Annual price developments were driven mainly by household energy prices, which fell 6.3%, due to the 15.2% fall in heating oil prices. Food and non-alcoholic beverage costs fell 2.9% on the year. Motor fuel prices, on the other hand, jumped 6.0% since November 2008.

Analysts see energy prices pushing inflation towards 1% over the coming months. Yet, the huge under-utilisation of capacities and the clouded outlook for consumer spending is expected to drag core inflation gradually well below 1%.

With unemployment expected to rise in the next months and throughout 2010, wage growth in all likelihood will remain very moderate.

Germany's largest trade union, the IG Metall, has already signaled moderate demands for the upcoming wage round in the important metalworking and engineering industry next year.

Price expectations remain rather subdued also due to the rise of the euro's foreign exchange rate.

Eurozone inflation is expected to reflect the tendency seen in Germany. The Bundesbank said in its latest monthly report last week that economic and monetary indicators currently signal no marked inflation risks in the eurozone.

"Against the backdrop of a substantial under-utilization of productive capacities and declining employment, the price outlook remains favorable," the report stated.

"Inflation projections conducted on the basis of monetary data overall don't point to distinct risks for price stability over the medium term," the Bundesbank remarked.

For detailed information see data table on MNI MainWire.