German State Data Shows October Inflation Drop

Preliminary state data released on Friday indicates that inflation in Germany is cooling in October.

The statistics point to a likely decline in the national rate, which economists currently expect to drop to 3.1% from 3.3% in September. These state-level figures provide an early signal before the final national numbers are published later this week.

In Bavaria, the inflation rate decreased to 2.8% in October, down from 3.2% in September. North Rhine-Westphalia saw a larger drop, falling to 2.7% from 3.3%. Lower Saxony’s rate declined to 2.9% from 3.3%, while Baden-Württemberg experienced a 0.3 percentage point reduction to 2.6%. Saxony’s inflation rate held steady at 2.8%.

The German government projects annual inflation to reach 2.7% this year, followed by 3.0% in 2027. The current trajectory is complicated by rising energy costs driven by the war in Iran, which have pushed prices up in recent months. These state figures align with forecasts from economists polled by Reuters, who anticipate a downward shift in the harmonized national rate for the euro zone’s largest economy.

The national data will be released later on Friday, preceding the broader euro zone inflation report scheduled for Wednesday. Economists expect the euro zone inflation rate to tick up slightly to 3.9% in October, compared to 3.8% in September. The European Central Bank left interest rates unchanged on Thursday but signaled a potential hike in December, citing high and rising energy costs as a driver for inflation risks.