German inflation rises to 2.1 pct in June: official figures

Source: Xinhua| 2018-07-12 23:15:13|Editor: Mu Xuequan
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BERLIN, July 12 (Xinhua) -- The annualised inflation rate in Germany rose to 2.1 percent in June, official figures published on Thursday by the Federal Statistical Office confirmed.

The Wiesbaden-based government agency noted that consumer price growth above two percent had hence already been measured for the second month in a row. Compared to May, the official consumer price index was up by a monthly rate of 0.1 percent.

According to the Federal Statistical Office, the continued rise in inflation chiefly owed to significantly higher energy cost shouldered by German consumers which increased by 6.4 percent between June and May. The average price of heating oil and fuel hereby rose by 30.3 percent and 11.3 percent respectively.

Reflecting this upward trend for energy costs, prices in the broader category of goods were up by an annual 2.8 percent in June compared to the same period last year. Excluding energy, overall inflation in June would have been measured at a more modest rate of 1.6 percent. Annual food price inflation still reached 3.4 percent, however, marking the third consecutive month in which the Federal Statistical Office has recorded a rate above three percent for the category.

In contrast to the monthly jump in the cost of energy, the price of services increased by a slower pace of 1.5 percent between June and May 2018. While rental prices rose by 1.6 percent, airfare tickets (minus 4.2 percent) and telecommunications (minus 0.7 percent) both became cheaper.

Speaking to Xinhua on Thursday, Reint E. Gropp, president of the Halle Institute for Economic Research (IWH), predicted that the latest inflation data from Germany was likely to embolden the European Central Bank (ECB) in its decision to gradually begin winding-down its ultra-loose monetary policy of monthly bond purchases.

"Statistics on inflation confirm the stance of the ECB: discontinue asset purchases soon, but only gradually phase out the overall accommodating stance of monetary policy. While the data support the phasing out, they do not seem to immediately call for more action", Gropp said.

While an estimated annual inflation rate of 1.9 percent for the entire Eurozone was likely to meet the ECB's target of close to but under two percent, the IWH president warned that an accommodating monetary stance was still justified in light of the "fundamental weakness of the Euro-area labor market." Gropp noted that with unemployment at 8.4 percent in May, the euro area as a whole was "still producing below capacity."

Gropp further warned that, aside from the internal challenges of the Eurozone, "international risks" to growth in Germany and the wider the currency union had only grown. "While the tax reform in the U.S. should aide growth there and, looked at in isolation, result in more demand for goods from Europe, the protectionism and the ensuing trade war between the U.S. and its major trading partners should dampen growth and may even increase the likelihood of a worldwide recession", the IWH president argued.

As a consequence, the economic prospects of Germany were now much more subdued than had been the case at the start of the year. Gropp told Xinhua that "even though Germany is currently at full employment, the broader macroeconomic environment suggests that the ECB monetary policy is no longer too loose from the Germany perspective, but rather reflects the risks to inflation and the overall economic outlook."