German inflation drops to zero

New data published by Germany's statistic office, Destatis, on Tuesday showed that consumer prices in the country did not rise in September, compared with the same month a year ago.

The consumer price index showed zero change after rising only slightly by 0.2 percent in the previous month, fueling fears that prices could actually begin to fall again in the eurozone's biggest member state and beyond.

When using the EU's Harmonized Index of Consumer Prices (HICP), the inflation rate in Germany had already slipped below zero, the statisticians said, declining by 0.2 percent year-on-year.

Falling prices are bad for any economy because they might cause consumers to hold off on purchases in anticipation of further price declines, thus stifling business investment and economic growth.

According to Destatis, the weaker inflation rate reflected the continuing sharp fall in energy costs, which fell by 9.3 per cent in September after declining by 7.6 per cent in August. The other components of German inflation, including rents, food and services, rose in September, the data showed.

The European Central Bank (ECB) regards annual inflation rates of close to but just under 2.0 percent as conducive to healthy economic development.

In efforts to stave off deflationary pressures, the bank has cut its benchmark interest rate to a historically low level of 0.15 percent. In March, it also rolled out a controversial asset-buying program to boost inflation by pushing 60 billion euros ($67.4 billion) per month into the eurozone banking sector.

Even though Destatis published only a preliminary flash estimate, with final data to be released later in the month, the estimate already suggests that the oil price slump and weakening growth in China appear to undermine the ECB's efforts.

uhe/pad (Reuters, dpa, AFP)