(Recasts with pan-German data, fresh economist comment)
By Paul Carrel
BERLIN, April 28 (Reuters) - German annual inflation quickened slightly in April after hitting a 10-year low in March, pointing to firmer price pressures in the broader euro zone this month but failing to dispel the spectre of deflation.
Annual consumer price inflation (CPI) accelerated to 0.7 percent from 0.5 percent in March, preliminary data from the Federal Statistics Office showed. On the month, prices were unchanged, with both numbers in line with expectations.
The statistics office pointed to a 16.5-percent annual rise in the cost of package holidays as behind the uptick, linking that to the Easter holiday falling in April as opposed to in March a year ago. Gas prices also rose on the year.
"After headline inflation halved in the previous month, the current slight increase doesn't mark an end to the strong disinflation process yet," said Alexander Koch, economist at UniCredit in Munich.
"As energy prices peaked in July last year, further favourable base effects still lie ahead until mid-year -- assuming no surprising jump in the oil price. Inflation could already fall to zero next month," he added.
Bundesbank President Axel Weber said in a newspaper interview published on Monday that he expected Germany's inflation rate to turn negative in the coming months before price pressures firm markedly.
Weber, a member of the European Central Bank's Governing Council, confirmed his preference for halting interest rate cuts at 1 percent in the interview with the Frankfurter Allgemeine Zeitung.
However, Governing Council member Nout Wellink was quoted on Monday as saying the ECB should discuss cutting rates below 1 percent. The ECB meets to decide on rates next week.
WEAKENED DEMAND
Weber said inflation had eased largely due to a fall in energy prices.
A breakdown of the CPI data showed prices for heating oil and fuels rose on the month for the first time since January.
On the year, fuel costs in six German states fell by between 13.6 and 17.1 percent, the Office said. Heating oil prices fell by between 26.8 and 37.7 percent on an annual basis.
Germany is also suffering from weakened demand, particularly from abroad, that has seen industry orders slump recent months.
Highlighting industry's woes, carmaker Daimler
BHF-Bank analyst Stephan Rieke also expected prices to ease.
"Consumer prices are developing very moderately," Riecke said after the earlier release of state inflation data. "We are heading towards nil. Over the next months we will see negative inflation rates and they will remain under the nil threshold."
An EU-harmonised price index (HICP) also showed no change in prices on the month in April and a 0.7-percent increase compared to the prior year.
A Reuters poll of economists had pointed to no change in
either the CPI or HICP measure on the month, and for both to
register an 0.7-percent annual increase