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German inflation up slightly

June 29, 2016

Inflation in Germany has gone up a bit recently, reflecting a trend reversal in energy prices and higher prices for services. But economists are far from sounding the all clear after the latest statistical data.

Rewe supermarket
Image: picture-alliance/dpa/M. Becker

Inflation in Europe's economic powerhouse accelerated fractionally in June, the national statistics office, Destatis, said Wednesday.

It calculated that Germany's consumer price index rose by 0.3 percent last month, supported by more expensive energy and higher prices in the service sector.

The inflation data were a preliminary flash estimate on the basis of reported consumer price data from six of Germany's 16 states, with final data to be published on July 12.

More to come?

"It's an important step toward normalization," KfW Chief Economist Jörg Zeuner told Reuters. "Of course, we now have more uncertainty again because of the UK's pro-Brexit vote that might dampen the dynamics of price developments, but we expect an inflation rate of around one percent from August," he added.

Helaba Bank economist Ulrich Wortberg said a faster pickup was currently not in sight as he predicted only a moderate rise in energy prices in the months ahead.

Germany's June inflation rate is still far away from the European Central Bank's target of close to, but little under 2 percent.

Continuously low consumer prices or even sinking prices are widely viewed as a threat to economic growth, with both private households and companies tending to postpone purchases and investments in the hope that prices will drop even further.

hg/sri (AFP, Reuters, dpa)