German inflation hits lowest level in four years

Derek Scally

Inflation in Germany fell to its lowest level in four years in 2003 as GDP data released today is expected to show that growth in Europe's largest economy came to a virtual standstill.

Prices rose by 1.1 per cent year on year, a drop from an inflation rate of 1.4 per cent in 2002, according to data released by the Federal Statistics Office in Wiesbaden yesterday. One of the main reasons for the drop was because of the fall in the price of electrical goods, officials said.

Driving inflation were mineral oil products such as heating oil and petrol, with a 4.4 per cent hike. Without them, inflation would have been just 1 per cent.

After a month of 0.8 per cent inflation in November, things picked up for the end of the year with an increase in the price of travel. Hotel stays increased in price by 23 per cent while food increased in price by 0.2 per cent, normal for the holiday season.

Financial experts expect little change in the coming months. "The strong euro helps a lot in moderating the high oil price," said one analyst in Frankfurt.

Economic figures for 2003 are expected to show the German economy barely grew at all in 2003. The Federal Statistics Office releases GDP data today which is expected to show only the slightest of growth last year.

Economists polled by Germany's Deutsche Presse-Agentur news agency said that, while the economy is now growing again, they expect the 2003 data to show the economy grew by 0.1 per cent at most.

"The longest phase of stagnation in decades for the German economy is now over," said Dresdner Bank chief economist Mr Rolf Schneider. "Germany is now starting out on a recovery."