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Cheap oil has negative effect on German inflation

Cheap oil has negative effect on German inflation
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More bad news for the European Central Bank on inflation as annual consumer prices in Germany turned negative in January for the first time in five years.

That was mostly due to cheaper oil, with energy costs down 9.0 percent year-on-year. Food prices also slipped by 1.3 percent.

Preliminary data showed inflation in Europe’s largest economy dropped by 0.5 percent on the year in January after rising by nought point one percent in December.

That’s way below the ECB’s target of close to but just under 2 percent for the eurozone and economists says that signals the January number for the whole bloc will be even worse.

Unlike some others in Europe, Germany’s economy is strong enough to cope with falling prices illustrated by the latest jobs data.

The unemployment rate fell to a record low of six and a half percent of the workforce in January.

The head of the labour agency, Frank-Jürgen Weise, said: “We have good reason for optimism for the jobs market this year. And the fact that the economy is growing – which I can confirm right now – helps with the introduction of the minimum wage, which because of the way it’s being phased in, presents no risk to the labour market.”

Employment is at a record high in Germany and wages are rising.

Coupled with the falling prices, that is helping boost domestic demand in the country at a time when investment is weak and exports are sluggish.