The inflation in Germany accelerated significantly more than expected at the year-end, reaching its highest level in over three years. The increase is primarily due to rising fuel prices for cars and heating. On the other hand, the surprisingly strong jump in consumer prices could serve as a deterrent to the Germans’ appetite for shopping, as higher inflation means that consumers have less real income to spend.
The German consumer prices rose in December by 1.7% yoy after rising 0.7% in November, reported by the Federal Statistical Office. This is the so called harmonized index, which is used for the purposes of European institutions and fair comparisons with data from other Member States.
The data, near the target inflation the ECB of nearly 2%, is showing the highest inflation rate since July 2013 and has stronger growth than the forecast of analysts. The non-harmonized index of annual inflation also rose by 1.7%, and compared to 0.8% in November.
These are really strong inflation data, showing that the negative effects of lower oil prices currently has no fade. It is therefore likely inflation in Germany to reach the goal of the ECB’s close 2% in the coming months.
The strong recovery of inflation will pour water into the mill of some conservatives as president of the Bundesbank Jens Weidmann in its dispute for faster monetary policy tightening.