German inflation unexpectedly decreased in February, according to the country’s statistics office, leading to a downward revision of euro zone figures that may support further policy easing by the European Central Bank.
German inflation fell to 2.6% in February, revising down preliminary data that had shown the annual inflation, harmonised to compare with other European Union countries, was flat at 2.8%. “This is good news for the ECB,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. “Caution is nevertheless advised,” he added.
De la Rubia explained that the relatively low inflation rise was due to a below-average increase in goods prices. However, he warned that these prices could rise if a trade war erupts, with the EU defending itself more forcefully against imports from the U.S. and China.
Inflation in the euro zone fell to an annual rate of 2.4% in February, according to a first estimate from the EU’s statistics agency. The lower German inflation rate now suggests that euro zone inflation fell to 2.3% in February, according to Pantheon Macroeconomics estimates. Final data will be published on Wednesday.
In Germany, the increase in food prices accelerated in February, and above-average increases in service prices continued to push inflation higher. By contrast, energy prices had a downward impact on inflation.
The month-on-month inflation rate was also slightly revised down, from an initial 0.6% to a final reading of 0.5%. The office did not explain why it revised the harmonised inflation data downward.
