German inflation eases to 2.9% in January

(Sharecast News) - German inflation fell to 2.9% January in line with preliminary data, down from 3.7% in December, and driven by a sharp fall in energy costs, according to official data released on Friday.

There was a sharp drop in energy inflation to -2.8% from 4.1% in December, despite the discontinuation of the brake on energy prices and the introduction of a higher carbon price, which affects the price of fossil fuels such as motor fuels, heating oil and natural gas.

Food price rises continued to slow to 3.8%, compared with December's readout of 4.6%, but was still markedly higher than the overall rate of inflation.

"Overall, energy prices across key components remained relatively sticky at the start of the year. This is especially true for gas and electricity, considering the sharp decline in wholesale gas prices through 2023," said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics.

"We continue to see downside risks for prices in these components, based on the current trend in market prices. We think this is the case even considering the increase in CO2 taxes from €30 per tonne to €45."

"Food inflation ... remains in a downtrend. Here, as expected, we see significant divergences between key components. Prices for olive oil, grain and vegetables are still rising relatively briskly, while they're now falling in dairy, on a year-over-year basis."

Reporting by Frank Prenesti for Sharecast.com