German Prices Decline in Reminder of Inflation Battle

  • Annual inflation of minus 0.3% is below economist forecasts
  • European Central Bank is ramping up euro-area stimulus

Germany’s inflation rate turned negative again in April, highlighting the challenge facing the European Central Bank as it tries to spur regional price gains.

Consumer prices slid 0.3 percent from the prior year, data from the Federal Statistics Office in Wiesbaden showed on Thursday, based on a European Union-harmonized calculation. That’s below the median estimate of zero in a Bloomberg survey of economists, and compares with a 0.1 percent increase in March. Prices dropped 0.5 percent from the previous month.

The absence of inflation even in Germany, where earlier data showed jobless numbers dropped for a seventh month and the unemployment rate held at a record low, backs the ECB’s case that it must keep adding monetary stimulus to revive price growth across the 19-nation currency bloc. Policy makers are deploying a mix of negative rates, 80 billion euros ($90 billion) a month in bond purchases and cheap loans to banks as they strive to reach an inflation goal of just below 2 percent that hasn’t been hit for three years.

Before the German report, economists estimated that euro-area inflation was zero percent in April, compared with minus 0.1 percent the prior month. Eurostat will release those figures on Friday. The region’s inflation is forecast by the ECB to average to just 0.1 percent this year and climb to 1.6 percent by 2018.

(German statistics office corrects April data initially published on April 28.)
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