Bloomberg News

German December Inflation Slows More Than Initially Estimated

January 12, 2012

Jan. 12 (Bloomberg) -- Inflation in Germany, Europe’s largest economy, slowed more than initially estimated in December, as a cooling global economy and the region’s debt crisis damped growth.

The inflation rate, calculated using a harmonized European Union method, fell to 2.3 percent from 2.8 percent in November, the Federal Statistics Office in Wiesbaden said today. It had initially reported December inflation at 2.4 percent. In the month, prices rose 0.7 percent. Inflation averaged 2.5 percent in 2011 from the previous year, today’s report showed.

The European Central Bank, which aims to keep euro-area inflation just below 2 percent, lowered its benchmark interest rate by 25 basis points to 1 percent last month and said there are “substantial downside risks” to the region’s growth outlook. The German economy may be on the brink of recession after the statistics office said yesterday that gross domestic product fell in the fourth quarter of 2011.

“If we see no distortions in energy prices it is conceivable that the inflation rate comes back under the ECB’s definition of price stability as early as spring,” said Jens Kramer, an economist at NordLB in Hanover, Germany. “The global economy has entered a somewhat weaker phase.”

Inflation in the 17-member euro region slowed for the first time in five months in December, to 2.8 percent from 3 percent in November, according to an initial estimate from the European Union’s statistics office in Luxembourg.

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

To contact the reporter on this story: Jeff Black in Frankfurt at jblack25@bloomberg.net

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


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