German Inflation Slows In January

Germany’s harmonized inflation slowed in January underpinned by government subsidies on energy bills, official data showed Thursday.

Inflation, based on the harmonized index of consumer prices, eased unexpectedly to 9.2 percent from 9.6 percent in December, provisional data from Destatis revealed. The rate was seen at 10.0 percent.

Meanwhile, consumer prices advanced at a faster pace of 8.7 percent annually after the 8.6 percent increase in December. Economists had forecast prices to climb 8.9 percent.

Month-on-month, the HICP grew 0.5 percent, much weaker than the forecast of 1.2 percent. At the same time, consumer prices gained 1.0 percent compared to economists’ expectations of 0.8 percent.

The statistical office has rebased the consumer price index to 2020 from 2015. Due to the technical problem occurred during the extensive processing of the data, Destatis postponed the release of the provisional consumer prices data from January 31.

Final data for January along with all recalculated results from January 2020 will be published on February 22.

The flash estimate showed that Eurozone inflation eased to an eight-month low of 8.5 percent in January from 9.2 percent in December. But core inflation held steady at 5.2 percent.

As Destatis did not send any January inflation numbers to Eurostat, Eurozone inflation number is likely to be revised upwards, probably by 0.1 percentage point, ING economist Carsten Brzeski said.

Brzeski observed that headline inflation is currently not the best inflation tracker. The European Central Bank is set to focus on core inflation and continue hiking rates as long as core inflation remains stubbornly high.

Early this month, the ECB had raised its interest rates by 50 basis points and signaled that policymakers plan to repeat the move in March.

Capital Economics’ economist Franziska Palmas said Germany’s inflation data is quite disappointing as it lack clarity at a time when inflation statistics are being watched so closely by policymakers and investors.

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