Inflation weakens – inflation at 1.4 percent

Inflation weakens - inflation at 1.4 percent

The development of energy prices dampened the rise in inflation in germany at the beginning of the year.

Consumer prices in january 2019 were 1.4 percent higher than in the same month of the previous year, according to the federal statistical office.

The wiesbaden authorities thus confirm an initial estimate. In december, the annual rate of inflation was 1.6 percent, according to a new calculation based on a reweighting of the goods basket. From december to january, consumer prices fell significantly by 0.8 percent overall.

The rise in energy prices slowed further at the beginning of the year. Energy prices up 2.3 percent over the year. In december, energy prices had still risen by 4.9 percent and in november by 8.7 percent. Drivers in particular benefited from the trend. Gasoline cost just 0.3 percent more than in january 2018. Electricity, gas and other fuels rose by 3.3 percent. Compared to the previous month, energy has become 2.0 percent cheaper overall.

Food prices rose by a below-average 0.8 percent over the year. Consumers had to dig deeper into their pockets for cold rents (1.5 percent), for which private households spend a large proportion of their consumption expenditure.

The inflation rate is an important indicator for the monetary policy of the european central bank (ECB). The central bank aims for an annual tax rate of just under 2.0 percent for the euro zone in the medium term – far enough away from zero.

Permanently low or roughly falling prices could tempt companies and consumers to postpone investments. That slows down the economy. Weak inflation is one of the main reasons for the extremely loose monetary policy that has been pursued in the euro zone for years. In the euro zone, the rate in january was 1.4 percent higher than a year earlier. In the previous month it was still 1.6 percent.

The wiesbaden authorities regularly review the composition and weighting of the basket of goods into which the prices of services and merchandise are incorporated. Consumers’ habits are changing, certain products are no longer available, new ones are coming onto the market.

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