Germany's Inflation Rate Rebounds After Brief Dip Below Zero

  • Consumer prices unexpectedly rise 0.2% from previous year
  • Data imply upside risk to euro-area inflation due Friday

Inflation unexpectedly returned to Germany this month, raising the chances that a spell of consumer-price declines in the 19-nation euro region may also prove temporary.

Prices in Germany rose an annual 0.2 percent after dropping by the same amount in September, the Federal Statistics Office in Wiesbaden said on Thursday. Economists predicted a rate of zero, according to a Bloomberg survey. The data means there’s now an upside risk to the median forecast of economists that euro-area prices stagnated in October. That report is due on Friday.

Euro-area consumer prices will probably increase 0.1 percent in October, after dropping 0.1 percent the previous month, Fabio Fois, an economist at Barclays Plc in Milan wrote in a note.

The rebound in prices in Europe’s largest economy may comfort European Central Bank officials concerned that low inflation will become entrenched, harming the region’s growth potential. President Mario Draghi has all but committed to bolster stimulus in December, when new forecasts will show whether the institution is moving further away from bringing inflation closer in line with its mandate. Last month, projections showed price gains averaging 1.7 percent in 2017, compared with it medium-term goal of just below 2 percent.

Executive Board member Benoit Coeure signaled in a speech on Tuesday that the cue for more stimulus may come from any downward revision to those forecasts. Vice President Vitor Constancio and Governing Council member Ignazio Visco said on Wednesday that policy makers are ready to use all available instruments if needed, though their Estonian and Latvian colleagues argued against any imminent action.

Confidence in the euro-area economy unexpectedly improved in October in a sign of a resilient domestic recovery, according to a report from the European Commission on Thursday. A Purchasing Managers’ Index of manufacturing and services also defied economists’ forecasts for a drop.

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