Tags: German | Inflation | food | costs

German Inflation Unexpectedly Accelerated in December on Food

Wednesday, 02 Jan 2013 08:27 AM

 

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German inflation unexpectedly accelerated in December as food and travel costs surged.

The inflation rate in Europe’s largest economy, calculated using a harmonized European Union method, rose to 2.1 percent from 1.9 percent in November, the Federal Statistics Office in Wiesbaden said.

Economists had predicted inflation to remain unchanged, according to the median of 11 forecasts in a Bloomberg News survey. In 2012, inflation averaged 2.1 percent.

Inflation in Germany breached the European Central Bank’s 2 percent limit for a second year even as the debt crisis curbed spending and investment in the 17-nation currency bloc, the country’s largest export market. The euro area entered its second recession in four years in the third quarter and the German economy may have contracted markedly in the final three months of the year, the Bundesbank said on Dec. 17.

“We’ve seen massive increases in food prices in December which are interrupting the gradual decline of inflation rates,” said Thomas Kramer, an economist at NordLB in Hanover. “I wouldn’t exaggerate this development. Inflation should continue to moderate if energy-price driven costs ease further.”

Oil prices fell more than 7 percent last year as the cooling economy curbed demand. The ECB last month lowered its economic forecasts and President Mario Draghi said he expects euro-area inflation to fall below 2 percent this year.

The rate fell to 2.2 percent in November and economists predict it dropped to 2.1 percent last month. The European Union’s statistics office in Luxembourg will publish that report on Jan. 4.

In the month, consumer prices rose 1 percent. Non- harmonized German inflation accelerated to 2.1 percent in December from 1.9 percent in November, the report showed.

Prices for package vacations surged 22.8 percent in December from a month earlier, and food prices gained as much as 1.2 percent in the states, which published inflation data Wednesday.

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