German consumer prices decline again
GERMAN consumer prices fell in November for the third consecutive month, official data showed Monday, dragged down by a sales-tax cut intended to boost spending as the economy suffers under the pandemic.
Inflation was down 0.3 percent in November year-onyear, according to preliminary data from federal statistics agency Destatis, and fell to minus 0.8 percent month-onmonth, as restrictions to limit the spread of the second coronavirus wave weighed on consumer demand.
Chancellor Angela Merkel announced the closure of the gastronomy, leisure and culture sectors for the month of November, before extending them into the new year as the country seeks to bring down stubbornly high infection numbers. Europe’s largest economy last had positive inflation in
une, with flat or negative inflation since the summer.
Destatis said the dip has been due in part to the German government’s decision to cut VAT from uly to encourage spending throughout the coronavirus shutdowns. The stimulus measure is set to last until the end of the year.
“Looking ahead... the path of headline inflation will depend on whether or not the German government sticks to its plan of reversing the VAT reduction in anuary,” ING bank analyst Carsten Brzeski said. Analysts surveyed by Factset had expected November’s inflation to come in at minus 0.2 percent year-on-year, the same rate as in October.
Energy prices in Germany continued to dive in November, falling 7.7 percent, while consumer goods prices were 1.8 percent lower. Food prices rose 1.4 percent meanwhile, Destatis said.
Falling prices will add to fears that Germany will drag down inflation across the eurozone, a key concern for policymakers ahead of a crunch European Central Bank meeting next week. Observers expect the ECB to boost its pandemic bond-buying programme and tweak bank lending rates to add support to the currency area’s battered economy.
According to the ECB’s preferred yardstick, known as the Harmonised Index of Consumer Prices (HICP), German inflation stood at minus 0.7 percent year-on-year -- far off the ECB’s inflation target of just under two percent.