German inflation slows on an annual basis in October 2017 and remains below the target of the European Central Bank (ECB). The results, in fact, support the regulator’s decision to reduce the incentives, but at a slow pace.
The consumer prices in the largest European economy rose by 1.5% on an annual basis, according to the harmonized index (HICP), which is used for the purposes of the European institutions and above all to be comparable to those in other European countries. In September German inflation was 1.8%, according to data from the Federal Statistical Office (Destatis).
Falling energy inflation drove the decline in the headline number. However, the data also suggested that underlying inflation was also weaker than expected.
On a monthly basis, consumer prices in Germany declined by 0.1%.
In both cases, the figures are below expectations for inflation of 1.7% per year and 0.1% on a monthly basis.
Therefore, it appears that the softness in Germany and in the euro area core inflation, which was noted in September, was probably not because of one-time factors. Thus, the upward trend in core inflation that was recorded earlier in 2017 has taken a breather and therefore there are now increased risks to the downside to the inflation projection.
The details of the non-harmonized data show that only food inflation accelerated in October compared to September.