German inflation edges higher in June

27th June 2014, Comments 0 comments

Inflation in Germany, Europe's biggest economy, edged fractionally higher in June after reaching its lowest rate in four years the previous month, preliminary data showed on Friday.

According to a flash estimate calculated by the federal statistics office Destatis, German inflation rose to 1.0 percent this month from 0.9 percent in May, its lowest level since February 2010.

Inflation is currently unusually low across the 18-nation eurozone, fuelling concerns the region could be on the brink of deflation -- a sustained and widespread drop in prices.

While falling prices may sound good for consumers, deflation is actually dangerous for the economy because it can trigger a vicious spiral where businesses and households delay purchases, thus throttling demand and causing companies to lay off workers.

Such concerns persuaded the European Central Bank to cut interest rates at its monthly policy meeting earlier this month and launch a series of other measures to ease monetary conditions in the single currency area.

Using the Harmonised Index of Consumer Prices (HICP) -- the yardstick used by the ECB -- inflation in Germany picked up to 1.0 percent in June from just 0.6 percent in May.

The ECB defines price stability as annual inflation of just below 2.0 percent.

Preliminary German inflation data are calculated on the basis of cost-of-living statistics of six out of Germany's total 16 regional states.

Final data based on all 16 states are scheduled for publication on July 11.

© 2014 AFP

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