Photographer: Adam Berry/Getty Images

German Prices Drop Most in a Year, Highlighting ECB Challenge

  • Consumer prices fell 0.9 percent in January as oil dropped
  • Inflation rate rose to 0.4 percent, matching forecast

German consumer prices fell at the fastest monthly pace in a year in January as plummeting oil prices and weakness in emerging-market economies postpone a long hoped-for pickup in inflation.

Prices declined 0.9 percent from December, the Federal Statistics Office in Wiesbaden said on Thursday. That’s the largest decline since January 2015. Even so, the annual inflation rate rose to 0.4 percent from 0.2 percent the prior month, in line with the median estimate in a Bloomberg survey.

While slightly faster inflation may seem like welcome news to the European Central Bank which is trying to fuel price pressures in the 19-nation euro area, the acceleration masks a deteriorating outlook. With a drop in oil prices of almost 25 percent since early December weighing on inflation expectations, ECB President Mario Draghi has signaled more stimulus may come as early as March.

Before today’s report, economists projected that euro-area inflation accelerated to 0.4 percent in January from 0.2 percent the prior month. Eurostat will release the figures on Friday.

In December, the ECB predicted inflation in the region would accelerate to 1.6 percent in 2017. The Bundesbank sees inflation in Germany at 2 percent next year.

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