Rising Inflation

Higher than usual price increases for energy and fuel as well as for many food products were major contributing factors to the higher inflation rate, the Federal Statistics Office said on Friday, Dec. 28.

Last year, the inflation rate was 1.7 per cent.

In December, consumer prices were up 2.8 percent from the same month a year ago, according to provisional figures based on returns from six of Germany's 16 federal states.

This represented a slight slowdown from November when the annual inflation rate climbed to 3.1 percent, breaking the three-percent barrier for the first time in 13 years.

Annual inflation stood at 2.4 percent in October.

Stagnating economy?

Since then, however, food, commodity and energy prices have continued to exert an upward pressure on inflation.

On a month-by-month basis, consumer prices in December rose 0.5 percent from November. Officials attributed this to higher spending on gifts, food and holidays during the Christmas period.

Signs of renewed inflationary pressures have come amid evidence that global growth is slowing, helping to fuel concerns that the world economy could be facing a period of stagnation.

Added to this has been the economic uncertainty unleashed by the US housing market crisis.

"We expect inflation to remain high during the moths ahead," European Central Bank chief economist Jürgen Stark told Saturday's edition of the stock exchange newspaper, Börse Zeitung.