Consumer price data from the German state of North Rhine-Westphalia (NRW) showed inflation cooled in January led by cheaper clothing, shoes and package holidays.
Prices in NRW, the first of six states to report data used to compile a national estimate for Germany, fell by 0.3 per cent month-on-month and rose by 1.5 per cent year-on-year.
Consumer price data from the German states offer the first glimpse of wider inflation trends across the euro zone. Germany accounts for around one-third of the pan-euro zone consumer price index, which in December showed annual inflation of 2.4 per cent.
In December, prices in NRW rose by 0.8 per cent month-on-month and by 1.8 per cent from a year ago.
NRW is Germany's most populous state and carries the biggest weight in the country's consumer price index. German retailers reported heavy discounting this month, and NRW's CPI data showed that prices of clothing and shoes fell by 3 per cent from December.
Package holidays were 23.9 per cent cheaper than the previous month. Economists polled by Reuters forecast prices for the whole of Germany would fall in January by 0.2 per cent month and rise by 1.8 per cent year-on-year.
In December, prices rose 1.0 per cent month-on-month and by 2.1 per cent year-on-year. Germany's statistics office is not expected to publish a preliminary estimate for pan-German inflation until Monday, after all states have reported.