Bloomberg News

German Inflation Slowed in November as Debt Crisis Damped Demand

December 10, 2011

Dec. 9 (Bloomberg) -- Inflation in Germany, Europe’s largest economy, slowed in November as the region’s worsening fiscal crisis damped economic growth.

The inflation rate, calculated using a harmonized European Union method, declined to 2.8 percent from 2.9 percent in October, the Federal Statistics Office in Wiesbaden said today, confirming an initial estimate published on Nov. 28. In the month, prices were unchanged.

“Inflation pressure is easing because of the problems in the euro zone,” said Arnd Schaefer, an economist at WestLB in Dusseldorf, Germany. “We’ll see a clear drop” in inflation rates next year, due also to declining energy costs.

The European Central Bank yesterday lowered its benchmark interest rate by a quarter percentage point to 1 percent, with President Mario Draghi saying there are “substantial downside risks” to the growth outlook. Euro-region unemployment rose to the highest in more than a decade in October and consumer confidence dropped to a two-year low last month.

Euro-area inflation will slow to 2 percent in 2012 and 1.5 percent in 2013 from 3 percent today, the ECB predicted yesterday.

With governments stepping up austerity measures to contain the region’s fiscal crisis and companies eliminating jobs, consumers may hold back spending, undermining economic growth. German services output contracted in November and the Bundesbank on Nov. 21 cut its 2012 growth projection to between 0.5 percent and 1 percent, saying a “pronounced” period of weakness can’t be ruled out.

Metro AG fell the most since its 1996 initial public offering in Frankfurt trading on Dec. 6 after Germany’s biggest retailer forecast that sales and earnings will fall this year following a weak start to the Christmas season.

--Editors: Simone Meier, Matthew Brockett

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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