German inflation back to zero in September: data

29th September 2015, Comments 0 comments

Consumer prices in Germany, Europe's biggest economy, did not rise in September, data showed on Tuesday, raising pressure on the ECB to prevent the wider euro area from slipping into a dangerous cycle of falling prices.

Germany's national inflation yardstick, the consumer price index, showed zero change this month, after rising by a meagre 0.2 percent the previous month, the federal statistics office Destatis said.

And using the Harmonised Index of Consumer Prices (HICP) -- the barometer used by the European Central Bank -- the inflation rate in Germany actually declined by 0.2 percent year-on-year in September, the statisticians said.

The ECB regards annual inflation rates of close to but just under 2.0 percent as conducive to healthy economic growth and has recently launched a raft of measures to kickstart prices and push area-wide inflation back up nearer that level.

A controversial programme of sovereign bond purchases, known as QE or quantitative easing, was rolled out in March and initially appeared to work.

But the economic slowdown in China and depressed oil prices have pushed inflation expectations back down again.

The inflation data on Tuesday were a preliminary flash estimate calculated from consumer price data for six of Germany's 16 regional states.

Final data based on all 16 states were scheduled to be published on October 13.

Analysts said the data will raise the heat on the ECB to step up its anti-deflation measures.

"With inflation flirting with negative territory, the ECB should get a little bit more nervous, although the fresh weakness in inflation looks to be a temporary blip due to oil prices," said Natixis economist Johannes Gareis.

"The ECB is likely to intensify talks about further monetary stimulus," he said.

Capital Economics economist Jessica Hinds was sceptical that the new inflation data would "mark the start of a prolonged bout of deflation in Germany. Nonetheless, weak underlying price pressures will keep total inflation subdued."

All in all, "we expect German inflation to remain far beneath the ECB's target for the eurozone as a whole," she said.

"Today's data add weight to our view that the ECB will need to increase the size of its asset purchase programme, perhaps as soon as December," Hinds said.

BayernLB economist Stefan Kipar agreed.

"Overall, the pressure remains on the ECB to remain alert and take additional measures to prevent inflation expectations from sliding further."

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© 2015 AFP

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