Bloomberg News

Inflation in Germany’s North Rhine-Westphalia Slowed in October

October 26, 2011

Oct. 26 (Bloomberg) -- Inflation in the German state of North Rhine-Westphalia slowed in October due to a one-off drop in education costs.

The inflation rate decreased to 2.3 percent from 2.8 percent in September, the state’s statistics office in Dusseldorf said today. In the month, prices fell 0.3 percent. Economists forecast that German inflation, calculated using a harmonized European Union method, will slow to 2.8 percent from 2.9 percent, the median of 22 estimates in a Bloomberg News survey shows. The Federal Statistics Office in Wiesbaden will release that report, based on data from six states, tomorrow.

The European debt crisis and slowing global growth are demand for oil, the main driver of inflation this year. While euro-region inflation accelerated to 3 percent in September, European Central Bank Governing Council member Ewald Nowotny said yesterday the central bank doesn’t see any inflation risks.

“Inflation has probably peaked in Germany and the euro region,” said Alexander Koch, an economist at UniCredit Group in Munich. “It’s likely to drop below 2 percent in the first half of next year, hence the ECB doesn’t need to be overly concerned about future price pressures.”

Without the 52.2 percent drop in education fees from a year earlier, North Rhine-Westphalia’s inflation rate would have remained unchanged at 2.8 percent, the statistics office said. The price for heating oil rose 24.4 percent in the year and flights were 18.7 percent more expensive.

Europe’s leaders, struggling to heed the world’s calls to once and for all eradicate what U.S. Treasury Secretary Timothy F. Geithner called the “catastrophic risk” of the debt crisis, are back in Brussels today for an emergency summit. A potential Greek default threatens to spark shockwaves that could engulf Italy and France, jolt the banking system and spell havoc for the global economy.

German business confidence fell to a 16-month low in October and investor confidence plunged to the lowest in three years on concern that earnings may suffer.

While Germany’s Bundesbank on Oct. 17 predicted “strong” growth in the third quarter due to a rebound in industrial production and private consumption, it said the outlook has deteriorated.

--With assistance from Kristian Siedenburg in Vienna. Editors: Simone Meier, Matthew Brockett

To contact the reporters on this story: Gabi Thesing in London at gthesing@bloomberg.net;

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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