German consumer price inflation accelerates sharply in December

Germany’s inflation, gauged by the consumer price index accelerated sharply in December 2016. According to the Federal Statistical Office, the year-on-year consumer price inflation accelerated to 1.7 percent, the highest level since July 2013. The annual average prices for 2016 rose 0.5 percent year-on-year, slightly above 2015’s 0.3 percent.

The sharp year-on-year rise in inflation in December was mainly driven by energy prices. In total, energy prices rose 2.5 percent year-on-year in December. In the initial 11 months of 2016, only price decreases were registered on the relevant months of the previous year. December prices rose year-on-year for mineral oil products, electricity and strong fuels.

Marked declines were registered for charges for central and district heating and gas prices. Stripping energy prices, the inflation rate would have been 1.6 percent in December, which is significantly higher than in the preceding months. Prices of food also came in quite higher in December on a year-on-year basis.

The prices of goods in total were up 1.8 percent in December, mainly driven by energy and food prices. Services prices grew 1.5 percent, which was mainly due to the development of net rents exclusive of heating expenses.

On a sequential basis, German inflation, measured by consumer price index rose significantly by 0.7 percent in December.

Inflation measured by the harmonised index of consumer prices (HICP) was up 0.4 percent year-on-year in 2016. For the month of December, the index rose 1.7 percent year-on-year. However, throughout 2017, the rates of inflation were evidently below the two-percent threshold, which is significant for the monetary policy of the euro area. On a sequential basis, the index was up significantly by 1 percent.