German Inflation Accelerated on Energy Costs
Inflation in Germany, Europe’s largest economy, quickened in July after energy costs increased.
The inflation rate, calculated using a harmonized European Union method, rose to 2.6 percent from 2.4 percent in June, the Federal Statistics Office in Wiesbaden said today, confirming an initial estimate published on July 27. From the previous month, prices climbed 0.5 percent.
Crude prices rose in July before plunging at the end of the month as concern about the health of the U.S. economy, the world’s biggest oil user, grew. European Central Bank President Jean-Claude Trichet said last week that euro-region inflation is “likely to stay clearly above 2 percent over the coming months,” even as the region’s sovereign debt crisis threatens to exacerbate an economic slowdown.
“So far energy prices have mainly driven inflation but we possibly have seen the peak in oil prices,” said Arnd Schaefer, an economist at WestLB AG in Dusseldorf, Germany. “While inflation may trend lower, it is likely to stay above the ECB’s comfort zone for the remainder of the year.”
The Frankfurt-based central bank, which aims to keep inflation just below 2 percent, has raised borrowing costs twice this year, taking its benchmark rate to 1.5 percent.
On a non-harmonized basis, German inflation accelerated to 2.4 percent from 2.3 percent and consumer prices rose 0.4 percent in the month, the statistics office said.
A more pronounced global slowdown than currently expected may ease price pressures. In June, the ECB forecast euro-area growth of 1.9 percent this year and said it expected inflation to average about 2.6 percent.
“Fears are increasing that there could be a global downturn again,” ECB Governing Council member Ewald Nowotny told Austrian state radio ORF yesterday. “For Europe, that’s not what the forecasts show, but of course Europe” would be “drawn into this,” he said.
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
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