German Inflation Breaks Through 2% for First Time Since 2012

  • Consumer prices rose annual 2.2% in February vs 2.1% estimate
  • Euro-region inflation forecast to accelerate to 1.9%

German inflation accelerated above 2 percent for the first time in more than four years, adding to signs of gathering momentum in Europe’s largest economy.

Consumer prices were up 2.2 percent in February from a year ago, the Federal Statistics Office said on Wednesday. The increase is above the 2.1 percent forecast by economists in a Bloomberg survey and follows a reading of 1.9 percent the previous month. Prices rose 0.7 percent from January.

The continued pick-up in inflation will feed into discussions among European Central Bank policy makers at their next meeting on March 9 about whether the time has come to discuss an exit from unconventional policies. At the same time, it threatens to put the ECB, which aims to keep euro-area price growth just below 2 percent in the medium term, at the center of Germany’s public debate ahead of elections scheduled for September.

To be sure, Wednesday’s report comes on the back of signals that economic growth in Germany has been picking up. A gauge of factory activity rose to the highest level in almost six years amid a surge in new orders. Joblessness extended its decline, helping abate concerns that the arrival of over 1 million refugees in the country between 2015 and 2016 would drive up unemployment.

The German data set the stage for a further acceleration of euro-area inflation. Economists predict a rate of 1.9 percent for February, according to a separate poll. While French and Spanish price growth remained below forecasts, a stronger-than-anticipated reading in Italy and the vanishing effect of a decline in the cost of oil last year should push the rate higher. That report will be published on Thursday at 11 a.m. in Luxembourg.

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