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Five German States Say Inflation Accelerated in February

Feb. 28 (Bloomberg) -- Inflation in five German states accelerated in February as energy prices increased.

Inflation rates rose in Baden-Wuerttemberg, Bavaria, Brandenburg, Hesse and Saxony, the states’ statistics offices said today. Economists forecast that German inflation, calculated using a harmonized European Union method, slowed to 2.2 percent from 2.3 percent, the median of 25 estimates in a Bloomberg News survey shows. The Federal Statistics Office will release that report, based on data from six states, later today.

“Oil prices have risen very strongly in recent weeks and that will be the main component in inflation,” said Alexander Koch, an economist at UniCredit Group in Munich. “At the same time, the economy is slowing in comparison to last year and that will ease price pressures.”

Concern that sanctions against Iran’s nuclear program will disrupt crude supplies from the second-biggest producer in the Organization of Petroleum Exporting Countries has driven oil prices 9.6 percent higher this year, even as the global economy slows. The European Central Bank cut its main interest rate twice in the fourth quarter to a record low of 1 percent as the effects of the region’s debt crisis threatened to choke growth.

The German economy, Europe’s largest, contracted 0.2 percent in the fourth quarter as government spending cuts across the euro area damped demand for the country’s exports. The European Commission forecasts German growth will slow to 0.6 percent this year from 3 percent in 2011.

By contrast, the commission projects economic contractions in Italy and Spain of 1.3 percent and 1 percent respectively for this year. The 17-nation euro economy will shrink 0.3 percent in 2012, it said on Feb. 23.

                         Monthly            Yearly
                         Change             Change

Bavaria                  0.9 (-0.4%)         2.6 (2.3%)
Brandenburg              0.8 (-0.4%)         2.5 (2.2%)
Hesse                    0.8 (-0.3%)         2.2 (1.9%)
North Rhine-Westphalia   n/a (-0.4%)         n/a (1.8%)
Saxony                   0.7 (-0.4%)         2.4 (2.3%)
Baden-Wuerttemberg       0.9 (-0.4%)         2.5 (2.2%)

To contact the reporter on this story: Jeff Black in Frankfurt at jblack25@bloomberg.net

To contact the editor responsible for this story: Matthew Brockett at mbrockett1@bloomberg.net

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