Inflation: Consumer prices decline for the first time since 2009 – Reuters

Inflation: Consumer prices decline for the first time since 2009 – Reuters

Inflation

In Germany, prices have fallen more in January than expected by experts

(photo: dpa).

Wiesbaden Consumer prices in Germany have fallen because of rapidly falling energy costs for the first time since September 2009 again. The minus beginning of the year was even more slightly more than previously known. The Federal Statistical Office reported in Wiesbaden on Thursday, inflation fell in January to minus 0.4 percent. Good for consumers: you can soak up much cheaper and heat than a year ago

In a first estimate in late January, the statisticians had for the start of the year yet determined a rate of minus 0.3 percent.. From December to January, prices fell sharply by 1.1 percent. With sustained falling prices is called deflation, which is considered as very high inflation as dangerous

inflation. Questions and Answers

• The main reason is the fall in crude oil prices. The lubricant of the global economy became cheaper on world markets since last summer by about half. This reduces the overall cost of heating oil and fuels. And because the energy expenses by hiring of the biggest single item in the household budget of the Germans, which can decrease overall inflation. What is the influence that current calculations of the Federal Office: Would not considered food and energy, consumer prices were in January to 1.1 percent over the previous year. Including both items resulted in a rate of minus 0.4 percent.
  

• From the consumer’s point of view first of all nothing. Heating oil prices fell by more than 83 euros in June 2014, less than 60 euros at the end (for purchase of 3000 liters, including VAT). And at some gas station in Germany got motorists mid-January, the liter diesel temporarily for less than a euro – the first time since March 2009. The decline in prices for heating oil and gasoline would be in this country was even more pronounced if the euro had not so much indulged against the dollar. Who saves during fueling and heating, may tend to spend more money on other things. The desire to buy seems great: The consumer sentiment numbers of Germans after the Nuremberg GfK on a 13-year high. Additional driver is for savers extremely unattractive interest rate environment: investing money is hardly worth

• The danger is that prices over a longer period transversely covered by all departments. Economists call this deflation. If there is such a development, which can paralyze entire economies: consumers and businesses could in the face of falling prices, acquisitions and investments defer – after all it might soon be even cheaper. Who wants to sell something, could find themselves forced to cut prices. This makes the profits sink and reduced scope for investing. Individual works are no longer utilized policy. Short-time work, layoffs or even the closure of entire sites can be consequences. More unemployed, less consumption, less tax revenue – an economy slipping into deflation, reduces the overall economic performance increasingly. It threatens a downward spiral.

• Most economists currently see no danger and refer to the great weight of falling energy prices. Bundesbank President Jens Weidmann has repeatedly stated that he saw no downward spiral of negative inflation rates, a decline in economic output and wage cuts. A week ago, said Weidmann, the low level of inflation explain mainly by the sharp decline in energy prices: “This should not be confused with a self-reinforcing deflation and its negative consequences. The risk of deflation on a broad front is still very limited. “

• Indeed. Weidmann emphasized: The lower oil prices are like a “little stimulus plan” for the euro area, because consumers and businesses pay less for the important raw material. Partly because of this oil price effects, the federal government raised its economic forecast for Germany for the year just got back from 1.3 percent to 1.5 percent. The EU Commission is convinced that the fall in oil prices and the weak euro will bring the euro countries than initially expected 2015 growth. Brussels believes the current year in the euro zone with a gain of 1.3 percent instead of the initially predicted 1.1 percent.

• In most cases, yes. In addition, the flood of money the European Central Bank (ECB) should make itself felt. The central bank announced in January to buy in large-scale government bonds. From March 2015 to at least September 2016, will be pumped into the economy in this way more than 1.1 trillion euros. One goal: to drive inflation back towards the ECB’s target of just below 2.0 percent. At this value, the ECB is preserved price stability. That’s far enough away from the zero mark and deflation from the perspective of monetary authorities.

• The European Commission expects that inflation is gradually rising again from mid-2015. The authority for the current year expected a rate of 0.2 percent in 2016 then 1.4 per cent for the European Union. For the euro area a negative inflation rate of minus 0.1 percent is predicted for 2015 then in 2016 1.3 percent. By deflation Brussels speaks explicitly not.

The price decline in January is the strongest since July 2009, when prices in decreased compared with the same month last year by 0.5 percent. At that time the German economy, however, was burgled while she currently stands quite well – and also because of cheap energy. For Commerzbank economist Christoph Weil, the slump in oil prices is even a boon for the economy “. Consumers need to spend less energy and have more money for other things”

Overall, the annual rate of inflation eroded the third consecutive month on how the statisticians said. In December, consumer prices were slightly increased by 0.2 percent in November to 0.6 percent in October to 0.8 percent.