German Inflation Accelerated in April as Energy Prices Rose

Inflation in Germany, Europe’s largest economy, accelerated in April as energy costs rose, adding to pressure on the European Central Bank to increase interest rates.

The harmonized inflation rate jumped to 2.6 percent from 2.3 percent in March, the Federal Statistics Office in Wiesbaden said today. That’s in line with the median forecast in a Bloomberg News survey of 21 economists. In the month, consumer prices rose 0.2 percent.

Surging oil prices have pushed inflation above the ECB’s 2 percent limit, prompting policy makers to raise the benchmark interest rate this month to 1.25 percent from a record low of 1 percent. While ECB officials have signaled they will keep increasing borrowing costs to curb price pressures as the euro region’s economy strengthens, peripheral nations such as Greece, Portugal and Ireland remain mired in a sovereign debt crisis.

“Going forward, inflationary pressure could turn out to be stronger than expected,” said Joerg Lueschow, an economist at WestLB AG in Dusseldorf. “Expectations are pointing upward and that’s a reason for concern.”

German non-harmonized inflation accelerated to 2.4 percent from 2.1 percent in March, with consumer prices rising 0.2 percent from the previous month.

‘Noticeable Clouding-Over’

Euro-area inflation probably accelerated to 2.7 percent this month from 2.6 percent in March, according to the median of 34 economist forecasts in a Bloomberg survey. That report is due from the European Union’s statistics office in Luxembourg on April 29.

Investor expectations for two more quarter-point increases in the ECB’s benchmark rate this year, taking it to 1.75 percent, are “well founded,” council member Ewald Nowotny said in Washington on April 16.

“We’re seeing a noticeable clouding-over of the price outlook, in Germany more so than in the euro region,” Bundesbank President Axel Weber said on April 15. Germany’s inflation rate may exceed 3 percent “during some months of the second half of the year,” he said.

The German economy may have expanded as much as 1 percent in the first three months of the year and it will probably maintain its growth momentum in the current quarter, the Bundesbank said on April 18. The German government predicts growth of 2.6 percent this year after a record 3.6 percent expansion in 2010.

Factory orders and industrial production jumped more than economists expected in February and unemployment fell for the 21st straight month in March, pushing the jobless rate to 7.1 percent, the lowest since June 1992.

Still, consumer confidence will decline for a second month in May as households grapple with higher prices, according to market research company GfK AG. Business confidence eased for a second month in April after reaching a record high in February.

To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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