The Gulf Time Newspaper One of the finest business newspapers in the UAE brought to you by our professional writers and editors.
Bloomberg
German inflation slowed in January to the lowest level in five months thanks to further government aid to ease the burden on households from soaring energy costs.
Consumer-price growth eased to 9.2% from 9.6% in December, Germany’s statistics agency said Thursday. Destatis had postponed the data’s scheduled release last week due to processing problems. That delay forced Eurostat to make an estimate for the continent’s biggest economy as part of its reading a week ago for the entire 20-nation euro zone.
Thursday’s number is more than half a point higher than Eurostat’s assumption — raising the likelihood of a revision when final figures are published on Feb. 23.
“With today’s German inflation data, chances are high that the initial euro-zone number of 8.5% year-on-year will be slightly revised upwards, probably by 0.1 percentage point,†Carsten Brzeski, ING’s global head of macro, said in a report to clients.
Interpreting the data is complicated by regular re-pricings of households’ energy contracts and various relief measures from the government. There was also an update to the consumer-price basket that Destatis uses for its calculations. Because of that change, the agency didn’t publish a breakdown of the separate components.
Germany picked up consumers’ natural gas bills in December, while a cap on electricity prices takes effect in January. A ceiling on heating will kick in next month, with households to receive reimbursements backdated for the first two months of the year.
Since Eurostat’s inflation reading last week, the European Central Bank has raised borrowing costs by another 50 basis points and signaled a hike of the same magnitude at its next meeting, in March.
“For the ECB, today’s drop in German headline inflation shows how slow and gradual the disinflationary process in the euro zone will be,†ING’s Brzeski said.
Policymakers are worried that stubborn underlying price pressurescould ignite a wage-price spiral demanding even higher interest rates.