German inflation drops to lowest level in four years

AFP
With the adjustment of eurozone inflation from 0.3 percent, the rate in August remained unchanged from the July level, but still much lower than 1.3 percent a year ago and way off the ECB's target of just under 2.0 percent
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With the adjustment of eurozone inflation from 0.3 percent, the rate in August remained unchanged from the July level, but still much lower than 1.3 percent a year ago and way off the ECB's target of just under 2.0 percent (AFP Photo/Bodo Marks)

Frankfurt (AFP) - Inflation in Germany, Europe's biggest economy, fell in July to its lowest level in over four years, official data showed on Wednesday.

Confirming a flash estimate released at the end of last month, the federal statistics office Destatis calculated that German inflation this month dropped to 0.8 percent year-on-year, its lowest level since February 2010, after rebounding to 1.0 percent in June.

Inflation has been unusually low across the 18-nation eurozone, fuelling concern the region could slip into deflation: a sustained and widespread drop in prices that hampers economic activity and threatens job losses.

While falling prices may sound good for consumers, deflation can trigger a vicious spiral where businesses and households delay purchases, throttling demand and causing companies to lay off workers.

Such concerns persuaded the European Central Bank to cut interest rates in June and unveil other measures to ease monetary conditions in the single currency area.

Using the Harmonised Index of Consumer Prices (HICP) -- the yardstick used by the ECB -- inflation in Germany stood at 0.8 percent in July, far below the bank's annual inflation target of just below 2.0 percent.

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