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German Inflation Continues to Ease in February as Expected by Consensus

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German Inflation Continues to Ease in February as Expected by Consensus

Consumer inflation in Europe’s largest economy eased further in February, led by another sharp decline in oil-based products.

Germany’s gauge of consumer price inflation rose 0.5 percent in February, after declining 0.6 percent the previous month, Germany’s Federal Statistics Office reported today. Compared to February 2013, inflation slipped from 1.3 percent to 1.2 percent, the lowest level since August 2010. Harmonized CPI, which is based on a methodology consistent across all European Union member-states, eased from 1.2 percent to 1 percent.

The downward price trend for mineral oil products was once again the biggest factor behind the comparably low inflation rate, the Wiesbaden-based office said today. Mineral oil products declined 6.8 percent annually. The price of motor fuels plunged 6.3 percent compared to a year ago. Household energy prices, which rose 0.2 percent on the month, declined 0.7 percent annually, led by an 8.7 percent plunge in heating oil.

Food prices increased significantly when compared to the previous year. Prices paid for food and non-alcoholic beverages rose 3.1 percent, official data showed.

Deflationary pressures in Germany continue to raise concerns about the broader euro area, which saw consumer inflation stabilize at 0.8 percent last month. The European Central Bank has repeatedly said deflation would not threaten the Eurozone’s fragile recovery. The central bank last week decided to keep interest rates at 0.25 percent.

Although it appears inflation is easing in Europe’s largest economy, the Institute for the Global Economy (IfW) has forecast a sharp rise in inflation later this year The German-based institute said this week it expects inflation to surge to 2.5 percent this year before peaking in the first half of 2015.

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