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Business

Fuel, heating oil prices up, causing rise in German inflation

Inflation in Europe's largest economy was up slightly in April. But this could change in the near future and exacerbate Germany's economic troubles.

Hand holding Euro coins with vegetable stand in background

Prices only rose slightly in April

German inflation rose slightly to 0.7 percent on an annual basis in April after hitting a 10-year low of 0.5 percent in March, according to preliminary figures released by the Federal Statistics Office on Tuesday.

Simon Junker, an economist at German bank Commerzbank, said that the rise was due partly to the Easter holiday falling later this year and because of a sharp rise in fuel and heating oil prices compared to March.

"However, in the coming months, inflation will fall and is likely to enter negative territory for a while," Junker said.

Experts said this was mainly a result of energy prices slipping back from record levels recorded in mid-2008.

The macroeconomic research consultancy Capital Economics said that inflation appeared "set to remain extremely modest well into next year as the severe recession reduces core price pressures."

On Wednesday, the German government will publish revised growth forecasts for the country. Experts expect it to more than double its current prediction of a 2.25 percent slump.

If this is joined by several successive months of falling prices, or deflation, it could compound Germany's economic woes as it might prompt consumers and businesses to delay purchases in the hope that prices will fall further.

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