German annual inflation accelerated in November as the country gears up for a three percentage point sales tax increase in January which is expected to raise the wider euro zone rate significantly.
Both Germany's national (CPI) and EU-harmonised (HICP) measures of inflation picked up slightly more than expected to 1.5 per cent from 1.1 per cent in October, preliminary Federal Statistics Office data showed today.
The figures, which showed that prices fell 0.1 per cent on the month, coincided with a fresh warning from the European Central Bank (ECB) that inflationary pressures could still be a risk in the 12-nation euro bloc. Price figures from Germany provide the first snapshot of inflation trends across the wider euro region, where annual inflation eased to 1.6 per cent in October.
Consumer price data from six German states today showed inflation sped up because a slight fall in average prices on the month failed to match a sharper decline one year earlier.
Oil costs eased, but the price of a number of goods rose. Economists said the government's value-added tax (VAT) increase would boost the rate further in the months ahead. Unicredit economist Alexander Koch said firms were already passing on the cost of the impending VAT rise.
"For example, the tobacco industry justified its recent increase in tobacco prices with the VAT increase," he said. "Experience from past VAT increases shows, however, that the bulk of the increase should occur in the months directly after the VAT increase. In total, we expect the VAT hike to boost consumer price inflation by 1 percentage point."