Inflation in Germany dips to 17-month low | Business| Economy and finance news from a German perspective | DW | 13.06.2012
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Inflation in Germany dips to 17-month low

A drop in fuel prices has led to a lower inflation rate in Germany in May. For the first time in about one-and-a-half years, consumer price increases did not surpass the psychologically important 2.0-percent barrier.

Inflation in Germany slowed to 1.9 percent in May on a year-to-year basis, the National Statistics Office (Destatis) reported on Wednesday.

It's the first time since December 2010 that increases in consumer prices were below the key level of 2.0 percent.

The European Central Bank (ECB) defines price stability as increases in its Harmonized Index of Consumer prices (HICP) of close to, but just below the two-percent threshold, making Germany a model student in the EU in May.

No irreversible trend

Inflation came down 0.2 percent month-on-month, with slowing fuel prices as the main reason for the slowdown last month. A detailed look at the fresh data reveals that prices for food items increased by 2.4 percent year-on-year. The priceof flour soared a staggering 30.1 percent within just a year, Destatis said in a statement.

Inflation in the 17-member eurozone fell to a 15-month low in May. The European Union's statistical office, Eurostat, put the rate in the single currency bloc at 2.4 percent, way above the level reached in Europe's biggest economy.

But even in Germany, inflation is expected to pick up again before long. Analysts point to marked wage hikes of over 4.0 percent in many industries across the country and say companies will try and pass on higher labor costs to consumers in the course of the year.

hg /tj (Reuters, AFP, dapd)