Germany: Inflation falls to lowest level in over two years
January 31, 2013
In January, consumer prices fell 0.5% over the previous month, according to a preliminary flash estimate released by the Federal Statistics Office (Destatis) on 31 January. The reading contrasted the 0.9% increase observed in December and exceeded market expectations of a 0.4% fall.
As a result of the monthly drop, annual headline inflation fell from 2.1% in December to 1.7% in January, which undershot expectations of 2.0% and marked the lowest level since December 2010. Annual average inflation stood at 2.0% in January (December: 2.0% year-on-year).
Annual HICP inflation (based on the harmonized index of consumer prices) followed suit and fell from 2.0% in December to 1.9% in January. That said, annual average HICP remained unchanged at December's 2.1%
The Bundesbank expects inflation to fall to 1.5% in 2013, before inching up to 1.6% in 2014
Author: Ricardo Aceves, Senior Economist