Bloomberg News

German Inflation Slowed in December as Debt Crisis Damped Growth

December 29, 2011

Dec. 29 (Bloomberg) -- German inflation slowed in December as Europe’s sovereign debt crisis damped economic growth.

The inflation rate, calculated using a harmonized European Union method, fell to 2.4 percent from 2.8 percent in November, the Federal Statistics Office in Wiesbaden said today. That’s in line with the median forecast of 18 economists in a Bloomberg News survey.

The 17-member euro region faces recession as cash-strapped governments cut spending to contain the debt crisis. The European Central Bank lowered its benchmark interest rate for a second straight month in December, saying economic activity is subdued and price pressures will ease.

“The weakening economy is the main driving force behind falling inflation rates,” said Marina Luetje, an economist at Dekabank in Frankfurt. “German and euro-region inflation will fall to 1.7 percent in 2013.”

Euro-area inflation will slow to 2.8 percent this month from 3 percent in November, according to the median of 24 estimates in another Bloomberg survey. That report is due on Jan. 4.

“Cost, wage and price pressures in the euro area should remain modest over the policy-relevant horizon,” the ECB said Dec. 15 in its monthly bulletin. “Inflation is likely to stay above 2 percent for several months to come, before declining to below 2 percent,” the bank’s inflation ceiling, it said.

--With assistance from Gabi Thesing in London. Editor: 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: Craig Stirling at cstirling1@bloomberg.net


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