German inflation accelerated in December to the fastest in eight months on surging energy costs.
The inflation rate rose to 0.8 per cent from a 0.3 per cent rate in November, the Federal Statistics Office in Wiesbaden said today. That matched an estimate published on December 29th. From the previous month, prices rose 0.9 per cent.
Crude oil posted its biggest annual gain in a decade last year and commodities from sugar to copper soared as the global economy began to recover from the worst recession in more than six decades.
The Bundesbank said last month that inflation will remain benign, averaging 0.9 per cent this year and 1 percent in 2011, after 0.3 per cent in 2009.
"Headline inflation has been almost completely driven by the energy price effect," said Colin Ellis, an economist at Daiwa Securities SMBC Europe Ltd. in London. "Underlying factors are subdued, so as we get to the middle of the year inflation will start to fall back again."
Heating oil prices rose 4.4 per cent in December from a year earlier and electricity prices increased 5.8 per cent, the statistics office said. Food prices fell 2 per cent. For all of 2009, inflation in Germany based on the EU measure averaged 0.2 per cent.
In the 16-nation euro region, inflation accelerated to 0.9 per cent in December, the fastest in 10 months, the European Union's statistics office in Luxembourg said on January 5th.
France's inflation rate rose to 1 per cent in December.
The European Central Bank, which aims to keep euro-area inflation just below 2 per cent, will probably leave its benchmark interest rate unchanged at a record low of 1 per cent when its governing council meets in Frankfurt today, according to all 50 economists in a Bloomberg News survey.
It is scheduled to announce its decision at 1.45pm and ECB president Jean-Claude Trichet will hold a press conference 45 minutes later.
The ECB has held the rate at 1 per cent since May, and executive board member Juergen Stark said on December 21st that inflation will remain "very moderate" in 2010 and "into 2011".
Economists forecast that euro-area inflation will accelerate to 1.2 per cent this year from an estimated 0.3 per cent in 2009, a separate survey today projects.
The German economy may expand 1.6 per cent this year and 1.2 per cent in 2011, the Bundesbank forecast on December 4th. The economy shrank 5 per cent last year.
Even as the economy strengthens, the threat of job losses may keep consumer spending in check, restraining companies' capacity to increase prices. Anheuser- Busch InBev NV, the brewer of Beck's and Stella Artois, plans to eliminate as many as 386 jobs in Germany, it said last week.
"It's still exports and industry which will drive the recovery in Germany, rather than private consumption," said Frederik Ducrozet, an economist at Credit Agricole SA in Paris. "A second wave of redundancies can't be ruled out, which is keeping consumers cautious."
Bloomberg