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Friday, March 14, 2008

Germany Inflation February 2008

According to detailed data released by the German Federal Statistical Office last Friday, the consumer price index for Germany rose 2.8% between February 2007 and February 2008. Compared with January 2008, the index was up 0.5%. In January 2008, the year-on-year rate of increase was also 2.8%, too. The inflation rate was hence unchanged.

The harmonised consumer price index (HICP) for Germany, which is calculated for European purposes, rose 2.9% in February 2008 on February 2007. Compared with the previous month, the index was up 0.5%. The HICP estimate of 29 February 2008 was thus confirmed.

The driving force behind this month's inflation rate in annual terms are higher energy prices (household energy and motor fuels). Although the share of energy in the consumption expenditure of households is less than 10%, it accounts for nearly one third of the overall price increase. In a year-on-year comparison, and referring to energy products, prices were up especially for liquid fuel (+32.9%) and motor fuels (+11.8%; including Diesel fuel: +15.9% and supergrade petrol: +9.9%). Electricity prices, too, increased above average (+7.1%) on a year earlier, whereas gas prices were down by 1.4%. Not considering the price trend for mineral oil products, the year-on-year rate of price increase would have been 2.3%.

Prices of food and non-alcoholic beverages were up an average 7.4% from February 2007 to February 2008 (of which food: +7.8% and non-alcoholic beverages: +5.1%). Vegetable prices were down by 1.7% on a year earlier. However, marked price rises were again observed for milk, cheese and eggs (+23.7%) as well as oils and fats (+18.3%). Also, for fruit (+9.6%) as well as bread and cereals (+8.3%), consumers had to spend more than a year earlier. Among non-alcoholic beverages, prices were markedly up in February 2008 for mineral water, juices and lemonades (+6.3%).

Since April 2007 already, the price rise in education (+34.9% in February 2008 on a year earlier) has had an impact on the year-on-year rate of price increase. The reason is the introduction of tuition fees in some Länder. Marked price increases were also recorded for transport (+4.3%). Consumer-friendly year-on-year price trends were again observed for telephone and telefax equipment (–19.0%), information processing equipment (–18.5%) as well as photographic and cinematographic equipment (–10.2%).

The 0.5% price increase on January 2008 is mainly due to seasonal price rises for package holidays (+8.6%) and accommodation services (+4.1%). Among seasonal goods, prices were up, among other things, for liquid fuel (+3.0%).

Prices of food and non-alcoholic beverages remained stable on the previous month (+0.1%), with marked price decreases observed especially for vegetables (–4.7%; including lettuce or iceberg salad: –26.4% and tomatoes: –18.5%). Particularly striking was the price trend for some foods: Following the considerable price rise a year earlier, butter cost 3.4% less than in the previous month; since December 2007, butter prices were down 13.7%. However, consumers had to spend 6.2% more on margarine as a butter substitute in February 2008. Price rises were also observed for chocolate bars (+6.3% on January 2008), following relative price stability in 2006 and 2007.

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