German inflation stuck at 0.8% for fourth month in a row

[FRANKFURT] Inflation in Germany, Europe's biggest economy, remained at the ultra-low level of 0.8 per cent for the fourth month in October, initial data showed on Thursday against a background of eurozone deflation worries.

In a flash estimate based on consumer price data for six key German states, the federal statistics office Destatis calculated that German inflation stood at just 0.8 per cent year-on-year last month, unchanged since July.

The last time inflation in Germany was lower than 0.8 per cent was in February 2010.

Using the Harmonised Index of Consumer Prices (HICP) - the yardstick used by the European Central Bank - inflation in Germany was even lower at 0.7 per cent in October, way below the ECB's annual inflation target of just below 2.0 per cent.

The chronically low level of inflation across the 18-nation eurozone has fuelled concern the region could slip into deflation - a sustained and widespread drop in prices that hampers economic activity and threatens job losses.

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

Such concerns persuaded the ECB to cut interest rates to a new all-time low and prime other anti-deflation measures such as a series of liquidity programmes to inject cash into the economy.

AFP