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German inflation spikes to 3.1 percent in March

AFP · 29 Mar 2008, 10:47

Published: 29 Mar 2008 10:47 GMT+01:00

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Consumer prices were up 0.5 percent from February in Europe's biggest economy. The data from late Friday was based on six key German states, with final figures to be released on April 16.

The main reasons for the increase were the same as those in recent months, with the Federal Statistics Office pointing to "food and non-alcoholic beverages as well as mineral oil products."

Food costs climbed 7.3 percent on a 12-month basis, while non-alcoholic drinks gained 9.6 percent. Some fuels rose by as much as 44.3 percent, the statistics service said.

Earlier on Friday, German central bank governor Axel Weber forecast that inflation in the 15-nation eurozone would remain around 3.0 percent for much of 2008 and only begin to ease in the second half of the year.

At Capital Economics, Jennifer McKeown noted that "it looks as though March's increase was due partly to a renewed pick-up in core price pressures," a worrying sign that inflation could be deeper rooted than in recent months.

Sylvain Broyer at Natixis added that there were risks of still higher prices down the line, saying "several providers of electricity announced a new hike in prices in April for Germany."

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Commerzbank's Matthias Rubisch said that "given how much prices are rising, private consumption is likely to make no more than a modest recovery of 0.75 percentage points this year."

Analysts agreed that the likelihood of an interest rate cut by the European Central Bank in the next few months was decreasing in light of growing price pressures.

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