German inflation edges up, but under control | Business| Economy and finance news from a German perspective | DW | 12.06.2013
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German inflation edges up, but under control

German inflation picked up in May, mainly driven by higher prices for foodstuffs. Falling fuel and telecommunication costs proved a damper, dispelling fears of runaway inflation on the back of cheap central bank money.

Prices paid by consumers in Germany grew 1.5 percent in May, compared with the same month in 2012 and edged up by 0.3 percent from the annual inflation rate recorded in March, Germany's statistics office, Destatis, said Wednesday.

Destatis' May data marked the second consecutive month of increasing prices after inflation in March slowed to its lowest level since 2010 with an annual rate of 1.2 percent.

Last month, prices were again driven by higher costs for foodstuffs, Destatis said. They have been rising steadily for one-and-a-half years.

Vegetables especially were more expensive, up 12.1 percent; followed by fruits, which cost 9.2 percent more than a year ago. Prices for meat and diary products were also up, by 5.6 and 4.3 percent respectively.

An additional boost to the consumer price index had come from lottery costs, Destatis noted, after a state-run lottery had increased its fees 21.1 percent in May.

In contrast, year-on-year costs for car and heating fuels slumped 3.7 and 5.9 percent respectively. In addition, cheaper services in the German telecommunications, finance and health sectors restrained inflation in May.

Destatis also said that under calculation methods used by the European Union's Harmonized Index of Consumer Prices (HICP) annual inflation in May rose to 1.6 percent from 1.1 percent in April.

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ECB drops main interest rate

Despite the increase, Germany had effectively reached price stability, Destatis said, because for months annual inflation had remained below the 2-percent stability threshold set by the European Central Bank (ECB).

The low inflation rate in Europe's biggest economy, might serve to dispel fears of runaway inflation in the crisis-hit eurozone as a result of the ECB's controversial monetary policy in recent months.

In May, the central bank cut interest rates to a historically low 0.5 percent. At the end of last year it announced a plan for aggressive monetary easing, including bond purchases of heavily-indebted eurozone countries, under efforts to defend the euro and to kickstart sluggish growth in the 17-nation currency area.

uhe/ipj (AFP, Reuters, dpa)

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