German inflation retreats further in February

German inflation dropped further in February as energy costs slumped due to a mild winter. Although the rate fell for the 3rd month, there’s neither reason for upside nor downside inflation worries, economists say.

Economists from Germany's Institute for the Global Economy (IfW) have predicted a sharp rise in inflation for later this year.

Using the European Central Bank's (ECB) so-called Harmonized Index of Consumer Prices (HICP) the German inflation rate came in even lower with just 1 percent. The rate contrasts sharply with a 2-percent inflation goal which the ECB considers as desirable with regard to price stability.

In February, the cost of living in Germany rose by 1.2 percent year-on-year, slumping from an annual rate of 1.3 percent in January and 1.4 percent in December 201the German Federal Statistics Office, Destatis, announced on Friday.

This was the lowest inflation rate in Germany since August 2010, the agency said, caused byretreating prices for oil-based products in the course of a mild winter.

Prices for heating oil, for example, had fallen 8.7 percent compared with February 2013, while car fuels dropped 6.3 percent over the year, Destatis said.

Significantly higher prices had to be paid for food, the data showed, which rose 3.5 percent overall. Butter was a staggering 20 percent more expensive than last year, while fruit and vegetables climbed 3.1 percent and 5.1 percent respectively.

In a growth report released this week, they predicted an inflation surge to 2.5 percent as a nascent economic recovery this year will peak in the first half of 2015.

uhe/hc (AFP, Reuters, dpa)