Tags: German Inflation Unexpectedly Increased in December

German Inflation Unexpectedly Increased in December

Wednesday, 29 Dec 2010 04:00 PM

Inflation in Germany, Europe’s largest economy, unexpectedly accelerated in December as prices surged in the final month of the year.

The inflation rate, calculated using a harmonized European method, increased to 1.9 percent from 1.6 percent in November, the Federal Statistics Office in Wiesbaden said today. That’s the highest since October 2008. Economists expected an unchanged reading, according to the median of 13 estimates in a Bloomberg News survey. From November, consumer prices jumped 1.2 percent, the biggest monthly gain since December 2002.

Germany’s economy is growing at a faster pace than its euro-area peers as countries such as Greece, Ireland, Portugal and Spain grapple with a sovereign debt crisis. That’s widening the divergences in the 16-nation currency bloc, making it harder for the European Central Bank to set policy suitable for all its members.

“The increased inflation pressure will likely remain a temporary phenomenon, the outlook remains unproblematic,” said Philipp Jaeger, an economist at DZ Bank AG in Frankfurt. “Still, the risk is rising that inflation may reach 2 percent in the euro region in December.”

European Inflation

European inflation held steady at 1.9 percent in November, in line with the ECB’s price-stability definition of just below 2 percent. The central bank, which has left its key interest rate at a record low of 1 percent since May 2009, this month forecast euro-region inflation will average about 1.8 percent next year and 1.5 percent in 2012.

German inflation averaged 1.2 percent in 2010, the statistics office said today. The Bundesbank predicts an average rate of 1.7 percent next year. It estimates the economy grew 3.6 percent in 2010, the most in two decades.

German consumer confidence will stay close to the highest level in more than three years as unemployment declines, boosting households’ willingness to spend, market research company GfK said last week. Retail sales rose the most in almost three years in October and business confidence surged to a record high in December.

In the German state of North Rhine-Westphalia, food prices rose 1.2 percent in the month and 3.8 percent in the year, a report from the state’s statistics office showed earlier today. Heating oil was 5.6 percent more expensive than a month ago and cost 28.7 percent more than in December last year. The price of crude oil has gained more than 6 percent in the past month.

The price of package tours soared more than 20 percent in December due to the Christmas holiday season.

“A bigger monthly increase in the consumer price index is pretty normal in a December due to seasonal patterns,” said Thomas Kraemer, a statistician at the Federal Statistics Office. “We always see a big rise in December as travel costs jump. We’ll get a normalization in January.”

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Inflation in Germany, Europe s largest economy, unexpectedly accelerated in December as prices surged in the final month of the year. The inflation rate, calculated using a harmonized European method, increased to 1.9 percent from 1.6 percent in November, the Federal...
German Inflation Unexpectedly Increased in December
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2010-00-29
Wednesday, 29 Dec 2010 04:00 PM
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