German inflation hits five-year low in December: data

5th January 2015, Comments 0 comments

Inflation in Germany, Europe's biggest economy, slowed to just 0.2 percent in December, its lowest level in more than five years, and averaged 0.9 percent for the whole of 2014, data showed Monday.

In a preliminary flash estimate, the federal statistics office Destatis calculated that German inflation stood at just 0.2 percent year-on-year last month, down from 0.6 percent in November.

The last time inflation in Germany was lower than 0.2 percent was in October 2009.

Taking 2014 as a whole, inflation stood at an annual average 0.9 percent, Destatis calculated.

The flash estimate is based on consumer price data for six key German states. Final data on the basis of all 16 German states are scheduled to be released on January 16.

Using the Harmonised Index of Consumer Prices (HICP) -- the yardstick used by the European Central Bank -- inflation in Germany was even lower at 0.1 percent in December, way under the ECB's annual inflation target of just below 2.0 percent.

The chronically low level of inflation across the single currency bloc has fuelled concern the region could slip into deflation -- a sustained and widespread drop in prices that hampers economic activity and could lead to job losses.

While falling prices may sound good for consumers, deflation can trigger a vicious spiral in which businesses and households delay purchases, throttling demand and causing companies to lay off workers.

Such concerns persuaded the ECB to cut interest rates to a new all-time low and roll out other anti-deflation measures such as a series of asset purchase programmes to inject cash into the economy.


© 2015 AFP

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