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German annual inflation set to fall in November, state data suggests

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Annual inflation in Europe's largest economy looks set to sink in November to the lowest rate in up to five years, according to data from some German states on Thursday.

[BERLIN] Annual inflation in Europe's largest economy looks set to sink in November to the lowest rate in up to five years, according to data from some German states on Thursday.

Data from three federal states showed yearly inflation easing, while price pressure remained stable in a fourth. The yearly readings were all well below the European Central Bank's target for close to but just under 2 per cent over the medium term in the eurozone.

In North Rhine-Westphalia, Germany's most populous state and a bellwether for the national rate, consumer price inflation eased to 0.7 per cent year-on-year from 1.0 per cent in October, hitting the lowest level since February 2010.

A Reuters poll conducted ahead of the states' data releases found economists expected national inflation harmonised to compare with other European countries - the ECB's preferred measure - to slow to 0.6 per cent from 0.7 per cent.

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Analyst Jennifer McKeown from Capital Economics said the state data released so far pointed to a fall to 0.4 per cent, which she said would be the lowest reading in five years. "With inflation set to remain far below target in the eurozone's largest and arguably strongest economy, the ECB will remain under intense pressure to provide more policy support," she said.

Earlier, Spain reported prices falling for the fifth month running.

Preliminary eurozone inflation data, due out on Friday, is expected to show the annual rate slowing to 0.3 per cent from 0.4 per cent, according to a Reuters poll. The ECB considers anything below 1 per cent to be in its deflation "danger zone".

The ECB has started buying covered bonds and asset-backed securities to revive the euro zone economy and keep deflation at bay. It may decide as soon as the first quarter of next year whether to begin buying sovereign bonds.

The Pan-German inflation figures are due to be published at 1300 GMT.

REUTERS

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