Inflation at four-year low

Low energy costs have kept Germany's inflation rate at its lowest level in more than four years, new statistical data revealed Monday.

Consumer prices rose by 0.8 percent in September compared to one year ago, far below the target of 2 percent that experts consider necessary for price stability, according to Germany's Federal Statistics Office, Destatis.

It was the third consecutive month that consumer prices swelled at that rate. The last time prices rose by less than 0.8 percent was in February 2010 when they rose by a mere 0.5 percent, as Europe's largest economy was still writhing from the eurozone debt crisis.

Low energy prices to blame

The creeping inflation rate can largely be traced back to falling energy prices as heating oil, gasoline and diesel fuel cost 2.2 percent less than one year ago. By comparison, the price of food rose 0.9 percent on the year, and the average amount of money tenants spent on rent was up 1.4 percent.

In the second quarter of 2014, real wages rose at a rate of 2.3 percent - considerably higher than the rate of inflation.

"Good developments in the labor market, a low inflation rate and the low savings rate are having an upwards effect on consumer spending in Germany," said Michael Hüther, the director of the Cologne Institute for Economic Research (IW).

IW estimates the annual inflation rate in 2014 will be 1.25 percent. In 2015, economists predict it will rise to 1.5 percent.

Fears of deflation

In the eurozone on the whole, the inflation rate is close to zero. In June, the European Central Bank lowered all three of its interest rates to record lows out of fear of deflation, including a dip of its benchmark interest rates to 0.05 percent.

Analysts expect the central bankers to begin pumping money into the bloc's economies by printing euros in order to buy government bonds through a program known as quantitative easing.

cjc/hg (Reuters, dpa)