German inflation rate rose slightly to 0.4% in November

The inflation rate in Germany rose slightly to 0.4% in November, as expected, compared to 0.3% in October. Food prices for example, at 2.3% year-on-year, increased at a noticeably sharper rate than in October. On account of poorer harvests this year, fruit and vegetable prices rose especially. 

Moreover, the dampening effect from energy prices continued to diminish. In November, energy prices were "only" 7.5% lower than the year before, compared to 8.7% lower in October, year-on-year. These two driving price effects were so strong that they overcompensated for a somewhat weaker core inflation rate of 1.3% (October: 1.4%).

The figures from Germany support the view that we can expect a similar pattern for the inflation rate in the euro zone, namely a rising headline inflation rate (0.2% compared to 0.1%) alongside a weaker core rate (1.0% compared to 1.1%). The slightly lower core rate is due firstly to the fact that this was driven up in October by a special effect in the prices of clothing and shoes and this was probably corrected in November.

Secondly, the rise in the prices of imported goods due to euro depreciation should have eased. The strong depreciation of the euro in past months had let the prices of imported goods surge. The inflation rate for industrial goods (excluding energy) has risen by 0.7 percentage points since the beginning of the year to 0.6%. The outlook of a continued weak inflation rate should be confirmation for the ECB that it should open the monetary floodgates wider on Thursday.