German inflation accelerates in May

[Arthur Gordon Pym]

German inflation accelerates in May


Construction workers build a scaffolding in Berlin in 2006. Steadily climbing energy prices have pushed German inflation higher in May, regional data showed, sending a gloomy signal regarding hopes for a pick-up in consumption.(AFP/DDP/File/Theo Heimann)


FRANKFURT (AFP) - German inflation accelerated sharply in May, preliminary data showed Wednesday, adding to worries about Europe's largest economy and further dashing hopes of a cut in eurozone interest rates.

According to an official projection based on data from six of Germany's 16 states, consumer prices rose 3.0 percent year-on-year, up from 2.4 percent in April and well above the European Central Bank's target of just below 2.0 percent.

Compared to April, prices rose 0.6 percent.

The main culprit was energy, with prices for heating oil rising as much as 13.3 percent just between April and May, and soaring by as much as 64.6 percent compared to May 2007, the statistics office said.

Prices Germans paid for diesel rose as much as 8.7 percent from April and by as much as 27.5 percent compared to the year-earlier period.
Food, another major item in monthly budgets, was also considerably dearer, rising as much as 0.7 percent from last month and as much as 9.2 percent in 12 months.

Prices rose by more than 3.0 percent in four major German states -- gaining 3.5 percent in western Hesse, 3.2 percent in southern Bavaria and 3.1 percent in the eastern states of Brandenbourg and Saxony.

In North Rhine-Westphalia, the most populous German state, inflation came to 2.8 percent while in Baden-Wuerttemberg, it was 2.9 percent.
On a monthly basis, increases of between 0.5 and 0.7 percent were reported, with energy prices again the main reason for the rises.

"Fuel prices have set records," said the Saxony statistics office, causing a knock-on effect on activities such as transport services.

In light of the data, the latest survey of consumer confidence -- Tuesday's GfK indicator -- found Germans were increasingly worried about how far their incomes would stretch.

Inflation is blamed for setting back a pickup in German consumption which the government had hoped would help compensate for slowing exports that have been hit by the euro's rise in value and tighter credit conditions worldwide.

The ECB has not followed the US and British central banks by lowering borrowing costs, saying its sole aim is to keep a lid on inflation which across the euro area has remained stubbornly above target.

[source]