German Inflation Slows Sharply In May

German inflation fell sharply in May on lower energy costs, official data showed Wednesday, mirroring slowing price growth in France and Spain

Frankfurt, Germany, (APP - UrduPoint / Pakistan Point News - 31st May, 2023 ):German inflation fell sharply in May on lower energy costs, official data showed Wednesday, mirroring slowing price growth in France and Spain.

The annual inflation rate in Europe's biggest economy eased to 6.1 percent, down from 7.2 percent in April, federal statistics office Destatis said in preliminary figures.

Analysts surveyed by FactSet had expected a May reading of 6.4 percent.

The drop was partly down to the comparison with May 2022, when energy prices soared in the wake of Russia's invasion of Ukraine.

Energy prices have come down from their peaks in recent months, helped by government relief measures to cushion the impact on consumers and businesses.

Food prices, however, continued to show "above average growth" in May compared with a year earlier, Destatis said.

Prices in the service sector also cooled this month, "probably due in part to the introduction of the Germany ticket", Destatis said, referring to a new public transport card allowing unlimited travel for 49 euros a month.

"The significant drop in the German inflation rate" brings "some relief", said KfW chief economist Fritzi Koehler-Geib.

"But there is still a long way to go," she said, before inflation reaches the European Central Bank's two-percent target.

The ECB has hiked interest rates by an unprecedented 3.75 percentage points since last July in an attempt to bring down rapidly rising consumer prices.

ECB vice-president Luis de Guindos earlier on Wednesday welcomed "positive" inflation data out of key eurozone economies recently, but he too warned that the battle against high prices was not over.

"The data that we have received yesterday and today is positive, it's a decline in headline inflation," de Guindos told reporters.

"But I would not say that the victory is there," he said.

"We are on a correct trajectory and we have to look very carefully at the evolution of core inflation" which excludes volatile food and energy prices, he added.

Consumer price growth slowed to 5.1 percent year-on-year in France in May, down from 5.9 percent a month earlier, preliminary figures showed Wednesday.

Spanish inflation meanwhile declined to 3.2 percent in May mainly thanks to lower fuel costs, after hitting 4.1 percent in April, according to figures released on Tuesday.