German inflation hits five-year low in December: data

[FRANKFURT] Inflation in Germany, Europe's biggest economy, slowed to just 0.2 per cent in December, its lowest level in more than five years, and averaged 0.9 per cent for the whole of 2014, data showed Friday.

In final data confirming a preliminary flash estimate released earlier this month, the federal statistics office Destatis calculated that German inflation stood at just 0.2 per cent year-on-year last month, down from 0.6 per cent in November.

The last time inflation in Germany was lower than 0.2 per cent was in October 2009.

Taking 2014 as a whole, inflation stood at an annual average 0.9 per cent, Destatis calculated.

Using the Harmonised Index of Consumer Prices (HICP) - the yardstick used by the European Central Bank - inflation in Germany was even lower at 0.1 per cent in December, way under the ECB's annual inflation target of just below 2.0 per cent.

The chronically low level of inflation across the single currency bloc has fuelled concern the region could slip into deflation - a sustained and widespread drop in prices that hampers economic activity and could lead to job losses.

While falling prices may sound good for consumers, deflation can trigger a vicious spiral in which businesses and households delay purchases, throttling demand and causing companies to lay off workers.

Such concerns have fuelled speculation that the ECB could launch a programme of sovereign bond purchases known as quantitative easing or QE when it holds its first policy meeting of the year next week.

AFP