Cheaper oil slows German inflation to 17-month low | Business| Economy and finance news from a German perspective | DW | 29.05.2012
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Cheaper oil slows German inflation to 17-month low

Weaker energy prices reduced May inflation in Germany to below two percent – the lowest level since the end of 2010. But analysts believe falling consumer prices will remain a blip on the screen in Germany.

Germany's inflation rate slowed to 1.9 percent in May, down from April and March rates of 2.1 percent respectively, Germany's Statistics Office (Destatis) said Tuesday.

The 0.2 percent drop constitutes the first time since 2010 that the German inflation rate has fallen below two percent – a level considered by the European Central Bank as price stability.

"In May, prices of car fuels fell for the first time on a month-by-month basis, while costs for heating declined for the third consecutive month," Destatis said in a statement.

Meanwhile, national inflation rates are falling on a global scale, the Organization for Economic Cooperation and Development (OECD) reported Tuesday.

The OECD also attributed the fall to a slowing of the 12-month rise in energy prices, as well as slower growth in food prices which had risen by 3.1 percent in April compared with 3.5 percent in March.

Declining prices, the OECD said, were largely a sign that global economic growth might slow down in the coming months.

German exception

However, market analysts are convinced that the dip in German inflation won't last.

On the back of robust growth and low unemployment, German wages were "due to rise," Commerzbank economist Ulrike Rondorf told Reuters news agency.

"Employers will certainly try to roll rising labor costs over to consumers," she added.

Ulrike Kastens, analyst with Sal. Oppenheim, told the same news agency that in 2013, German consumer prices were "rising faster than in the eurozone," averaging about two percent compared with a 1.7 percent increase predicted for other eurozone members.

uhe/nk (AFP, Reuters, dpa)