Energy costs fuel German inflation

German inflation accelerated more than economists forecast in August on higher energy costs.

The inflation rate, calculated using a harmonised European Union method, rose to 2.2 per cent from 1.9 per cent in July, the Federal Statistics Office in Wiesbaden said today. That's the first increase since February. Economists forecast a gain to 2 per cent, the median of 22 estimates in a Bloomberg News survey shows. In the month, consumer prices rose 0.3 per cent.

Oil prices have surged about 25 per cent since the end of June as storms in the Gulf of Mexico crimped output. At the same time, the European Central Bank predicts that euro-area inflation will slow to below its 2 per cent limit next year and is easing monetary policy to fight the region's debt crisis.

"Energy costs in July rose faster than expected, which is the main reason for the higher inflation," said Heinrich Bayer, an economist at Deutsche Postbank AG in Bonn. "I assume that Germany has seen its low point in inflation for this year. We better get ready for rates of above 2 per cent in the months to come."

Germany's non-harmonised inflation rate rose to 2 per cent in August from 1.7 per cent in July, the statistics office said. The main reasons for the increase were higher fuel and heating oil costs, it said.

In Bavaria, heating oil prices gained 2.1 per cent from July and were 13.6 per cent higher than a year ago, the state's statistics office said earlier today.

Economists predict euro-area inflation will accelerate to 2.5 per cent in August from 2.4 per cent in July, according to the median of 31 estimates in a separate Bloomberg survey.

Eurostat, the European Union's statistics office, will publish that report on August 31st.

Bloomberg