Energy Prices Power German Inflation To 3-year High

FRANKFURT AM MAIN, Jan 3, (UrduPoint / Pakistan Point News - 03rd Jan, 2017 ) - Inflation in Germany, Europe's largest economy, hit its highest level in more than three years in December, beating analyst expectations, official data showed on Tuesday.

A basket of consumer items increased in price by 1.7 percent in December 2016 from the same month the previous year, figures from the Federal statistics office Destatis showed. It was the fastest pace of inflation since July 2013 and beat the 1.5 percent predicted by analysts surveyed by Factset.

The German data comes on the same day as releases showed inflation in eurozone partners Spain hitting 1.4 percent and France 0.6 in December -- up from 0.5 percent and 0.3 percent the previous month.

Consumer prices in three of Europe's largest economies appeared to advance towards the European Central Bank's inflation target of just below 2.0 percent after months of stagnation. In Germany, inflation as measured by the ECB's preferred yardstick, the Harmonised Index of Consumer Prices, was also 1.

7 percent in December.

The central bank has set interest rates at record lows and pumped money into the economy by buying bonds and offering cheap loans to banks as it seeks to support growth and inflation in the 19-nation single Currency area.

But analyst Jennifer McKeown of Capital Economics warned that Frankfurt policymakers should stop short of opening any leftover New Year's champagne. France's inflation rate remains very low, she said, while the uptick in Germany was powered by energy prices recovering from a sharp dip.

December's 2.5-percent year-on-year boost to energy costs was the first increase in three years, McKeown noted, and followed a 2.7-percent fall in November. Looking over the longer term, German inflation stood at 0.5 percent for the whole year in 2016 -- behind France's 0.6 percent.

While the German economy could see core inflation beyond energy pick up in the medium term, "price pressures elsewhere in the eurozone are much weaker," she said, pointing to a "temporary" upward trend.