German Inflation Unexpectedly Held Steady on Oil Prices

German inflation unexpectedly held steady in July after energy prices rose.

Inflation, calculated using a harmonized European Union method, stayed at 2 percent in July, the Federal Statistics Office in Wiesbaden said today. Economists forecast a decline to 1.9 percent, the median of 18 estimates in a Bloomberg News survey shows. In the month, consumer prices rose 0.4 percent.

While oil prices are up 7 percent this month, they are still 7 percent lower than a year ago. The sovereign debt crisis is also hurting the economy of the 17-nation euro region, damping price pressures. The European Central Bank on July 5 cut interest rates to a record low to stimulate growth and lending, and President Mario Draghi said euro-area inflation may drop below the bank’s 2 percent limit by the end of the year.

“There aren’t any risks for strong price increases in Germany in the coming months amid the worsening growth outlook,” said Ulrike Rondorf, an economist at Commerzbank AG in Frankfurt. “In the euro area, there’s nothing to feed inflation. Everything speaks against it.”

Economists predict euro-area inflation was unchanged at 2.4 percent in July, according to the median of 17 forecasts in a separate survey. That report is due on Aug. 31.

In Germany, non-harmonized inflation remained at 1.7 percent, with prices rising 0.4 percent from June. The increase is primarily due to seasonal factors, the statistics office said. Prices for package tours and vacation rentals increased from July last year, it added.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE