Bloomberg News

Germany’s Harmonized Inflation Rate Unexpectedly Fell in January

January 31, 2013

German inflation unexpectedly slowed in January.

The inflation rate in Europe’s largest economy, calculated using a harmonized European Union method, fell to 1.9 percent from 2 percent in December, the Federal Statistics Office in Wiesbaden said today. Economists had predicted inflation to remain unchanged, according to the median of 20 forecasts in a Bloomberg News survey. Price dropped 0.7 percent on the month.

The government scrapped a 10-euro ($13.56) co-payment for doctors’ visits, reducing consumers’ health-care costs at the beginning of the year. At the same time, oil prices rose 6 percent this month and electricity prices surged after Germany’s power grid operators boosted the surcharge consumers pay for funding renewable energy to a record.

“German inflation will hover around 2 percent in the coming month before climbing again in the second half of the year as broad-based price increases loom,” said Ulrike Rondorf, an economist at Commerzbank AG in Frankfurt. “While signs are increasing that Germany could use higher interest rates in the course of 2013,” the European Central Bank “won’t be able to react.”

The 17-nation euro area is fighting its second recession in four years as governments from Greece to Spain cut spending to rein in excessive deficits. The ECB predicts the region’s economy will contract 0.3 percent this year, with inflation averaging 1.6 percent. That’s below the ECB’s 2 percent limit.

Euro-area inflation probably remained unchanged in January at 2.2 percent, according to separate survey. Eurostat, the EU’s statistics office, will publish that report tomorrow.

In Germany, non-harmonized inflation slowed to 1.7 percent from 2.1 percent, with prices declining 0.5 percent from December.

German states, which usually report inflation data before national figures are published, didn’t release numbers today because of a base-year change in the data series.

To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net

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


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