German Inflation Accelerates More Than Economists Forecast

German Inflation Accelerates More Than Economists Forecast
Cyclists pass an advertisement offering jobs at Siemens AG, in Berlin. Photographer: Michele Tantussi/Bloomberg

Inflation in Germany, Europe’s largest economy, accelerated more than economists forecast in November after food and energy prices rose.

The inflation rate, calculated using a harmonized European method, increased to 1.6 percent from 1.3 percent in October, the Federal Statistics Office in Wiesbaden said today. Economists predicted a gain to 1.4 percent, according to the median of 21 estimates in a Bloomberg News survey. In the month, prices rose 0.1 percent.

While inflation remains contained for now, Germany’s economy is growing at a faster pace than its euro-area peers as countries such as Greece, Ireland, Portugal and Spain grapple with a sovereign debt crisis. That’s widening the divergences in the 16-nation currency bloc, making it harder for the European Central Bank to set policy suitable for all its members.

“The combination of a thriving economy and continuously very low interest rates risks an unwanted acceleration in German inflation,” said Alexander Koch, an economist at UniCredit in Munich. Still, “inflationary pressures remain under control so far,” he said.

German consumer confidence will rise to its highest level in more than three years in December after the economic outlook improved and unemployment declined, boosting households’ willingness to spend, market research company GfK said this week.

Food, Fuel

Business sentiment surged to its highest level in two decades in November as a result of the brightening domestic outlook. The economy will grow 3.7 percent this year, according to the government’s panel of economic advisers.

“As in the previous months, the rate of price increases was mostly due to strong rises in the price of heating oil as well as of fruit and vegetables,” the Federal Statistics Office said in a statement.

“Commodity prices have risen somewhat, and that has to be kept under observation” said Christian Lips, an economist at NordLB in Hanover. “But the inflation rate in Germany is still rather muted and under the average level for the euro zone.”

In the euro area, consumer prices probably rose 1.9 percent in November from a year earlier, according to the median of 31 economists in a survey. That would match the rate in October, which was the fastest since November 2008. The EU statistics office in Luxembourg will publish the data on Nov. 30.

The ECB, which aims to keep inflation in the euro region just below 2 percent, on Nov. 3 left its key interest rate at a record low of 1 percent. The central bank in September forecast euro-region inflation will average about 1.6 percent this year and around 1.7 percent in 2011.

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