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Falling German consumer prices

January 29, 2015

For the first time in five years, Germans have had to pay less for goods and services as continuously low oil prices keep weighing on pricing policies. But experts said deflationary worries were exaggerated.

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Man with a shopping bag Foto: Daniel Reinhardt/dpa
Image: picture alliance/dpa

The cost of living dropped in Germany in January for the first time since the peak of the global financial crisis in 2009, the National Statistics Office (Destatis) reported Thursday.

Consumer prices dropped by 0.3 percent on average, reaching negative territory for the first time in five years, the office noted. In the previous month, inflation still stood at 0.2 percent.

The steep fall in January was attributed first and foremost to sinking oil prices and a marked drop in food prices.

ECB to the rescue

Experts suggested the bottom had not yet been reached as they expected the oil price to decrease further in the months ahead. But most analysts argued Germany would not be in for a protracted deflation.

"A full blown deflation would also entail sinking investment levels across the board and a slowdown in private consumption," Postbank economist Marco Bargel said in a statement. "But there are no signs of that in Germany and Europe as a whole."

Prompted by stubbornly low inflation rates on the Continent, the European Central Bank had recently announced the launch of a large-scale government bond-buying program to ease market pressures and boost lending to the economy and private households.

hg/bk (Reuters, AFP)