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German inflation hits highest level since 2012

Xinhua,January 16, 2018 Adjust font size:

BERLIN, Jan. 16 (Xinhua) -- German consumer prices rose by the fastest pace measured since 2012 during the past year, official figures published on Tuesday by the Federal Statistical Office confirmed.

According to the Wiesbaden-based government statisticians, average annual inflation reached 1.8 percent in 2017 after 0.5 percent in 2016. The Office attributed this development to higher energy, foodstuff and housing costs.

Another source of pressure on prices was identified by German media in the European Central Bank (ECB)'s ultra-loose monetary policy. The ongoing large bond-purchasing program adopted by the Frankfurt-based institution remains a source of controversy in Germany.

Recent data from the wider Eurozone suggest that ECB President Mario Draghi's unorthodox efforts to reinvigorate the growth in the bloc are increasingly bearing fruit. However, annual inflation in the Eurozone was still below the ECB's official goal of just under two percent at 1.4 percent in 2017, according to Eurostat.

Following a cheapening of energy during previous years, a spike in the cost of crude oil (3.1 percent), heating oil (16.0 percent) and gasoline (6.0 percent) combined to contribute to higher overall inflationary pressure in Germany compared to other Eurozone countries in 2017.

Furthermore, the domestic cost of foodstuffs rose by 3.0 percent, while rental costs (exclusive of heating) were up 1.4 percent during the same period.

Nevertheless, German price growth slowed again slightly to a monthly rate of 1.7 percent in December. This was mainly due to reduction in energy price growth from 3.7 percent in November to 1.3 percent during the last month of 2017.

Speaking to Xinhua, Thiess Petersen, senior economics expert at the Guetersloh-based Bertelsmann Foundation, identified the rise in German inflation as a sign that domestic firms were rapidly approaching the limits of their productive capacities.

"Given that the German economy is likely to grow at a comparably fast pace in 2018 as measured in 2017, I also expect an annual inflation rate of just under two percent in the coming year," Petersen said.

"A strong Euro reduces the price that consumers in Germany pay for foreign products", Petersen said, adding that events such as rising interest rates abroad or uncertainty surrounding the outcome of Brexit negotiations, which undermine the value of the Euro, would consequently "cause additional inflationary pressure in Germany and Europe." Enditem