Wiesbaden (dpa) – Significantly lower energy prices and lower VAT rates also pushed the inflation rate in Germany below zero in October as well.
Consumer prices were 0.2 percent below the level of the same month last year, as the Federal Statistical Office announced on Thursday. One of the reasons is still the temporary reduction of VAT, explained the Wiesbaden authority. She confirmed the preliminary data. In September, an annual inflation rate of minus 0.2 percent was also calculated. In July it was minus 0.1 percent.
Compared with September, consumer prices rose slightly 0.1 percent in October, according to statistics.
Consumers had to pay significantly less for energy than a year earlier in October: heating oil (minus 37.2 percent) and fuels (minus 10.7 percent) were significantly cheaper. The economy collapsed in the Crown crisis and with it the global demand for crude. Without the prices of energy products, the annual inflation rate would have been more than 0.6 percent.
By contrast, food prices rose 1.4 percent compared to the same month last year. Consumers had to dig deeper into their pockets, especially for meat and fruit. Tobacco products were also significantly more expensive (up 5.4 percent).
From July 1, lower VAT rates apply for half a year. The federal government wants to boost consumption in the Crown crisis. Distributors and service providers are free to decide whether and how they pass the relief on to consumers. According to a study by the Info-Institut, supermarkets have almost completely passed on the reduction to their customers. It was said that there were greater price reductions for product groups with more intense competition than for product groups with less intense competition.
As of January 1, the usual VAT rates will be applied again. The authors surrounding Ifo chairman Clemens Fuest do not rule out that prices are rising more sharply than they were previously lowered. This effect has occurred with some temporary reductions in other countries.
Consumer prices (HICP), harmonized for European comparison purposes, fell 0.5 percent year-on-year in October. In the euro area as a whole, consumer prices fell 0.3 percent compared to the same month last year, according to an initial estimate by Eurostat’s statistics office.
The European Central Bank (ECB) targets an annual inflation rate of just under 2.0 percent for the euro area with its 19 countries in the medium term. According to the monetary authorities, this is quite far from zero. After all, if prices are permanently low or falling across the board, this could tempt businesses and consumers to put off investments, in the belief that they could soon become even cheaper. This wait-and-see attitude can slow down the economy.